There are many reasons why it may be necessary to borrow money: this can start with the absolutely necessary purchase of a household appliance and extend to car purchases and repairs. Even when it comes to home ownership, the end is still a long way off. But: in germany, most lenders want to know about their customer’s creditworthiness before granting a loan. And if the schufa score used for this is negative, it becomes problematic at the very least; often the loan is refused altogether. What then? Despite a negative schufa score, you still have options for obtaining a loan.
- schufa is the largest and most important credit agency in germany – but not the only one.
- Based on the schufa data, the banks create a very clear picture of your creditworthiness.
- Despite a negative schufa score, you can take out a loan; for example, from private individuals or banks abroad.
This page at a glance
What schufa does
In order to explain credits without schufa, it is first necessary to refer to the schufa or. to enter your scoring. the schufa is a so called credit agency. A private company that collects data on individuals and companies. From this, they calculate a so-called schufa-score. In very simplified terms, this figure tells you how likely or unlikely it is that a borrower or contractual partner will be unable to make a payment due to his or her creditworthiness – for example, to repay a loan in full.
by the way, there are also other credit agencies in germany. However, the schufa is the most important – especially in the private customer sector. In its 2019 credit compass, schufa said it held information on 67.7 million natural persons and six million companies. This corresponds to almost all of germany’s population over 18 (69.46 million).
How schufa obtains its data records
schufa receives its information from its contractual partners. Most german banks work with schufa, as do leasing companies, cell phone providers and many other companies that deal with finance or regular payments.
in this case, cooperation means that you provide schufa with data about your customers, specifically their payment history. They are allowed to do so, because they have always received this permission from you in writing. When you open a checking account with a bank, for example, there will always be a passage in the contract documents that allows the bank to share your data with schufa; the situation is similar for most contracts that you will conclude in the course of your life. In return for passing on the data, the contractual partners then have the benefit of access to other data records via the schufa information – one hand washes the other.
Although schufa keeps the exact details of its scoring secret – it also uses publicly accessible data – you can still assume that it will be informed of both positive and negative "financial behavior" in a timely manner. In this way, a precise picture of each person is created, i.e. the score or schufa entry, and thus conclusions are drawn about their creditworthiness.
Summary
- schufa is a private company that collects data on individuals and companies.
- The schufa score ultimately decides whether you are creditworthy or not.
- schufa mainly works with banks to obtain its data.
- Most contracts include a clause about allowing a company to share data with schufa.
What schufa entries are all about
This means first of all: anyone whose data is held by schufa automatically has a schufa entry. However, this alone is not problematic. This will only be the case if negative schufa entry deals. For example, because you have defaulted on an installment for a loan. Then you have a "bad credit rating", a "negative schufa".
the derivation is simple: the more negative features a person accumulates in his or her schufa entry and the more frequently he or she receives a negative entry there, the further his or her schufa score drops, and the lower his or her credit rating becomes. For all those who use this scoring value, the picture is one of high financial risk if they work with this person despite negative schufa. this is the usual reason why people with a negative schufa entry do not get a loan. However, there are others that apply even without negativity:
- self-employed/freelancers. You cannot, in this sense, prove a permanent employment with a regular salary receipt. Many banks also see this as a high risk. in reality, however, it depends on the individual case – someone who has just founded a company is a greater risk than the head of a company that has been operating successfully for years. The latter will probably also get a loan from normal banks, only at worse conditions than any of their employees.
- Trainees. They receive only a very low salary, and their jobs are usually limited in time for the duration of their training.
- Pupils and students. From a banking perspective, they are subject to the same risks as self-employed persons.
- Unemployed people who receive unemployment benefit 1. this is limited to one year before reaching the age limit and is therefore also a risk.
- Unemployed people who receive unemployment benefit 2 ("hartz IV"). In addition, these persons can obtain (small) loans without interest from the job center in emergency situations. However, this does not apply to people with a permanent job who top up their income. They are often eligible for regular loans.
- pensioner. You can prove that you have a regular income, but depending on the loan amount, a bank may consider the remaining lifetime to be too short for a full repayment. Sometimes this means a high monthly rate and/or additional collateral.
the german credit act
in plain language: the banks do not grant a loan if, due to the negative schufa entry and/or other factors, the risk appears to them to be too great that they will not get the money back in full, including interest. This has nothing to do with bad intentions, but is anchored in law. Every institution that is subject to the German Banking Act (KWG) (in other words, all banks, savings banks, etc.) has a negative credit entry.) is obliged to approve loans only if there are no substantial doubts about the applicant’s creditworthiness. $18a KWG states as follows:
"the credit institutes check before concluding a consumer loan agreement the creditworthiness of the borrower. The credit institution may not approve the only conclude a consumer loan agreement if the credit check shows that there are no significant doubts about the creditworthiness of a general consumer loan agreement and that, in the case of a real estate consumer loan agreement, it is probable that the borrower will fulfill his obligations in connection with the loan agreement in accordance with the agreement."
Important: if you are refused a regular loan with reference to your schufa entry, your first action thereafter should be to apply for a schufa self-disclosure (according to article 15 DSGVO); this can be applied for once a year free of charge. Because: sometimes a schufa entry can also be false – for example, because it actually belongs to another person with your name – or still persist negatively, although the problem behind it has long been eliminated. In such cases, you should immediately notify schufa and have this entry corrected, if necessary with written evidence!
At this point, the loans in spite of or without schufa come on the tableau. This means: for these loans, lenders either do not use the schufa information or (this is the more common way) ignore it for the evaluation of the risk. For you, this means that there is usually always a possibility to get a loan despite a negative entry – because the cooperation with the credit agencies is common practice in many countries, but not a cross-border obligation.
Summary
- any action that schufa becomes aware of can affect the score.
- If, for example, you have defaulted on an installment for a loan, you have a "bad" credit rating.
- The banks will not grant a loan if they consider the risk posed by the negative schufa entry to be too great.
- In addition to a negative score, there are other factors that make it difficult to obtain credit. Among them unemployment, but also self-employment.
Loans despite negative schufa – this is how it can work
the bank refuses you a loan with reference to your creditworthiness. your personal schufa information shows that your score is justifiably bad. This is a clear obstacle, but it does not mean that you would no longer be able to get a loan as a borrower.
An additional borrower
Your first option could simply be to take your partner, a good friend or a close family member on board as an additional borrower. If this person has a better credit rating and – very importantly – his own income, the risk for the bank is divided between two borrowers, thus increasing the probability of a regular loan. especially if your score is only weak-negative, this is a multiple functional option.
Loans from private to private
Your second option could be to become a borrower on private way. You contact a person from your environment and ask them whether they would consider a credit-free loan to you. this is theoretically and practically a viable and popular option – because many people have people in their immediate environment who have the necessary money. in addition, there are now also online platforms that mediate such loans between actually unknown persons.
However, you should not think that this would be a loan without APR and similar formalities. Although no schufa query needs to be made here – after all, the private individual is not subject to the German Banking Act (kreditwesengesetz). Nevertheless, the german state has worked out rules here as well. Concretely it is about the interest. Then applies:
- Interest is treated for tax purposes like any other income from capital assets.
- The lender must therefore pay 25 percent final withholding tax and (still) 5.5 percent solidarity surcharge on it.
- If he does not do this, he commits a tax offense.
But let’s assume you borrow from a relative with no credit history. Couldn’t you then simply do without interest altogether?? Well, it depends. in such cases, the tax office always assumes that you have received a gift – which of course is subject to a gift tax. However, depending on the degree of connection, there are sometimes high free amounts over a term of ten years:
Tax class amount
| tax class 1 (spouse) |
500.000 euro |
| tax class 1 (children) |
400.000 euro |
| tax class 1 (grandchildren) |
200.000 euro |
| tax class 2 (siblings, parents, nephews, parents-in-law,…) |
20.000 euro |
| tax class 3 (relationship partner, distant relatives,…) |
20.000 euro |
Even if your relative does not want to take interest, the tax office will still apply a fictitious effective annual interest rate of 5.5 percent. If the theoretical interest sum over ten years then exceeds the exemption limit resulting from your degree of relationship, you may both have to pay gift tax.
This means for you:
- do not choose your private lender only according to your personal relationship, but in any case pay attention to the exemption limit necessary for your credit without credit history.
- Agree on a low, but market interest rate>/=3%, then the tax office does not assume a gift.
- Do not conclude only a verbal contract under any circumstances. prepare a document with the amount, the annual percentage rate of charge, the monthly rate, the term and, if necessary, the collaterals. So what is also in the contract with banks.
Anything else not only has the potential for trouble with the tax office, but has also broken up many a family relationship. And of course, even if it’s your mother, uncle, sister, you should be as disciplined in repaying a personal loan as you are with banks.
Loans with foreign banks
Your third option would be a loan from banks abroad. Terms such as "swiss credit" have become established here – even if it is only in name swiss credit deals. the basic principle is always the following: german banks must as mentioned, make a schufa inquiry. foreign banks, on the other hand, usually do not work with schufa, but with other credit bureaus from their country. That means, neither a schufa-inquiry is obtained, nor does your schufa-score have any meaning there.
You ask yourself why not everyone with negative schufa proceeds in this way to get credit despite negative schufa? It is in the peculiarity of the swiss credit. Because, of course, foreign banks do not take unacceptable risks either. you just replace the schufa information with other securities. These are mainly:
- Current proof of regular income. For example, salary slips, pension statements or balance sheets for self-employed persons. In addition, as a rule, also tax documents.
- proof of collateral that can be used as a substitute in the event of default, such as real estate, shares, etc.
- Often high interest rates. Higher, at least, than would be usual for a regular loan in this price range. This means that your monthly rate will be higher.
This means that even with a loan despite bad credit history, you will be examined very closely and your creditworthiness will be checked; often even more closely than would be the case with credit history – somehow the credit institution has to reinsure itself against a payment default. And despite all the documents, it is also possible that you will not be granted a loan because of poor creditworthiness. Because, and here lies an often misunderstood detail, the loan is granted without or without a mortgage. Despite schufa mediated, it is however not mediated with respectable offerers to people with disastrous financial situation. Those who do this nevertheless often belong to the list of dubious providers.
It should be clearly underlined that such loans are always made through foreign countries. Although there are institutions in Germany that claim to offer credit despite schufa, these are only credit brokers, not independent banks (i.e. they are not subject to the German Banking Act) and always work together with foreign banks – often, although not always, in switzerland or in other countries. Liechtenstein. This is also the reason why it is called swiss credit.
Summary
- If you can’t get a loan, you can get your partner, a good friend or a close family member to be an additional borrower.
- You can also contact a private person and ask whether they would consider a credit-free loan to you
- The third option is a loan with banks abroad; these usually do not carry out a schufa query.
- Please note that your creditworthiness will be checked more closely than it would have been with schufa.
A serious credit despite schufa – you must pay attention to
For many people the schufa has a negative effect. After all, this is a rather non-transparent (and therefore much criticized) company. However, you have to understand that the credit agency in connection with the german laws for banks also gives you security as a borrower – if you get money paid out thanks to a passed examination, this also tells you that you are working with a reputable provider, because otherwise he probably would not have received a credit report.
In the case of credit despite schufa, i.e. credit from foreign providers, you do not have this security feature. So you have to be careful yourself to recognize dubious providers. But which characteristics stand for seriousness?
- The provider takes into account your financial situation. He tells you, for example, that he will not give you a loan because you already have too many debts or your salary is too low for the desired amount and term – which you should listen to urgently in order not to get into real debt problems.
- The provider does not take exaggeratedly high interest rates. For a credit without credit history you always have to pay a little more, but high double-digit interest rates are a very critical feature and usually stand for "loan sharks" – hands off!
- The provider requires collateral from you in any case and does not give any guarantees that you would get a loan in any case regardless of poor credit rating.
- The provider does not want to have money from you first, before he acts at all.
- the provider does not ask you to transfer your salary to him or even wants blank powers of attorney.
- The provider does not send documents cash on delivery or has consulting hotlines that cost a lot of money per minute.
in short: a reputable provider sees you despite negative schufa as a normal borrower, to whom he lends money, if the other conditions are right. And if you are looking for such a swiss credit despite negative schufa, you should also basically first of all screen the name of companies on the Internet – you can assume that unserious providers quickly stand out and you can find enough reviews.
And of course: if, despite all your attempts, you really only have providers left who fulfill all the characteristics of a credit shark, you should ask yourself very carefully whether a credit despite schufa would really eliminate your financial problems or whether it would not rather contribute to deepening them.
