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Is a loan from abroad really safe?

Who takes up a loan abroad, has various reasons. Often there is a negative private credit entry or a loan application to a German bank was rejected because the applicant does not have the necessary credit rating. One reason for borrowing abroad may be the financing of a foreign property, such as a holiday home or a retirement home. But is it safe and reasonable to take out a loan abroad?

A foreign loan – what is it?

A foreign loan is not requested from a German bank but from a foreign bank. Here, a distinction is made between the Swiss loan and the foreign currency loan. The Swiss loan is also called a loan without private credit, since it is usually applied for if the applicant has a negative private credit entry. This loan is applied for at a Swiss bank, usually a brokerage institution is turned on. The Swiss banks do not seek information from the private credit, the private credit is also not informed about the loan application or lending. A foreign loan as a foreign currency loan is not given in euros, but in a foreign currency. A foreign currency loan can also be applied for at a Swiss bank and will then be granted in Swiss francs. Such a foreign currency loan is often used for real estate financing.

Advantages and disadvantages of loans from abroad

Advantages and disadvantages of loans from abroad

The advantages of loans from abroad are often the significantly lower interest rates compared to German loans. Allocation is often much easier than in Germany, because foreign banks may apply very different procurement rules. Foreign currency loans for real estate often have the advantage that they are flexible and special repayments are possible at any time. However, the price and the interest rates can also rise, which leads to an increase in the loan debt. Rising interest rates can lead to higher monthly payments. For those who have a negative private credit entry, a foreign credit is advantageous because no private credit information is obtained. But this is precisely where the disadvantages lie, because if such a loan is actually forgiven, the borrower can continue to go into debt and, in the worst case, end up in private bankruptcy. It can not be denied that foreign banks take a risk when lending to customers from Germany and therefore lend only small amounts; also the running time is often only short. If a foreign loan is requested through a mediation institute, the institute can often be royally paid for this service.

Possibilities of banks and countries for foreign credit

A foreign loan is often applied for in Switzerland, both as a Swiss loan and as a foreign currency loan. Often, foreign loans are also applied for in Liechtenstein; a well-known bank for Germans, who have a negative private credit entry, is the Sigma Kreditbank in Liechtenstein. Some foreign banks now operate branches in Germany; Examples are the Spanish Santander Bank or the English Barclaycard. Even though these banks have foreign parent companies, loans granted to German customers by the branches in Germany are not foreign loans. Foreign currency loans for real estate financing abroad can be applied for in various countries and banks, but strict rules apply. An income earned in Germany is rarely recognized, in addition, the borrower must have a residence in the respective country.

The call from the past

In the past, loans from abroad have had a negative reputation, not much has changed to this day. Foreign credits adhere to a negative image because they were brokered through financial institutions, which often demanded high costs for mediation. Many of these mediation institutions were frivolous, unfortunately, still today dodgy various dubious intermediaries on the market. Already for the application various intermediaries cashed, even if no credit was mediated. Foreign credit via intermediaries is still being advertised, but the Federal Administrative Court has already put a stop to dubious business in 2009. Lending without a license to Germans is no longer possible, the agency must have a license.

Security on loans from abroad

Security is always a problem with foreign loans, as it is often difficult to see whether credit institutions or financial intermediaries are reputable. If you want to take out a loan from abroad, the risk lies in getting to the wrong provider. The risk is not only high interest rates and costs for the intermediary, but also that it could be rip-off and you pay fees, but get no credit. Financial intermediaries often charge pre-mediation fees, but this does not increase the chances of obtaining a loan. If you would like to take out a loan from abroad, you should take care and be thoroughly informed about the intermediary.

Applying for loans from abroad

Applying for loans from abroad

Since you yourself do not know which banks are operating abroad and do not know the contact details of the banks, the foreign loan is almost exclusively requested through intermediation agencies. In addition, foreign credit institutions often reject loan applications from German investors. You can find contact details of placement companies on the Internet. In order to find the right institute, it makes sense to make the loan comparison over the Internet, which gives you an insight into the conditions. You submit your application online to a placement agency. The intermediaries know the right provider, whether it’s a Swiss loan or a foreign currency loan. The application is forwarded to the bank, which then reviews the creditworthiness of the applicant. The foreign banks also hedge against a default risk, they require collateral, for example, an income in a certain amount, a life insurance, a property or valuables. If the applicant can not meet the conditions for lending, he can provide a guarantor, but this carries a risk. If the conditions for granting the loan are met, the loan is granted.

Uses for the foreign credit

A foreign loan in the form of a foreign currency loan is generally used to finance real estate abroad. A Swiss loan is often applied for if a loan has been rejected in Germany and a negative private credit entry exists. Such loans are often used to overcome financial bottlenecks or finance an important purchase.

What you should consider when making a foreign loan

If you would like to apply for a loan abroad , you should secure yourself before applying. They should make the credit comparison and inform themselves about the conditions of the institutions. It makes sense to compare whether foreign loans are actually cheaper than loans from German banks. It is very important that you take a closer look at the placement agencies. Here you should pay particular attention to the fact that the intermediary has a license to negotiate loans to German customers. You should also be aware of the interest on the loan and pay attention to whether the interest rates are determined depending on the credit rating or credit rating and whether the loans are subject to variable interest rates. Since loans from abroad are risky, you should only set the loan amount as low as possible. If there is no alternative for credit from abroad, you should use Direct Adviser’s online credit comparison – www.Direct Adviser.com/kreditvergleich- , which is available to you free of charge. We will definitely find a suitable solution for your situation.