When bankers talk about a loan without equity, the loans are mostly real estate or condominium investments. As early as the beginning of the last decade, it was a rule of thumb to contribute at least 20.00% to 30.00% on a property or apartment purchase as equity capital for the planned project. This hurdle has fallen more and more in recent years. The current trend is based entirely on the British and Americans, who have been using full financing for real estate needs for decades.
Introductory overview of the topic of loans without equity
- Change in bank recruitment to grant a loan without equity
- Mandatory prerequisites for lending a loan without equity
- Sample calculations
- Forms of the loan without equity
- Possible pitfalls of loans without equity
- What to do if bad Private credit / credit rating?
- Current figures and interest rate developments
Introductory overview of the topic of loans without equity
Rising rents, extremely low interest rates and rising real estate prices are causing more and more people to want a home and thus created retirement savings. Banks often make it possible for clients who do not have the necessary capital reserves to fulfill this wish. The concept behind loans without equity is simple. The banking institutions extend the entire purchase price, including incidental costs, such as brokerage commissions, to your customers. The customer thus saves his nest egg and comes in parallel quickly to a possible retirement.
Change in bank recruitment to grant a loan without equity
Looking back at the historical perspective of lending indicators once for about 15-20 years, it can be seen that in the past, full financing would have represented an impossible event in Germany. Any bank in Germany would have picked up and asked for many different collateral, which reduces the lending risk of the bank something. The developments of recent years, however, show a serious change in this banking behavior. This raises only the question why are now full financing, so loans without equity completely in vogue and why the banks have changed your lending indicators?
A point for this willingness to change is certainly the economic constraint of the banks dar. Earlier scored the banking industry still with confidence and personal customer relation due to the bond with the bank consultant, who served the customer for decades of his life. Thus, globalization also found its way into the banking scene. Furthermore, the competitive structure has simply changed. In addition to the foreign banks, which wanted to build up a market in Germany and used the market entry barriers with correspondingly attractive financing offers for the customer acquisition, there were also a number of alternative types of financing, such as online platforms, for private money brokerage.
Numerous other pure Internet banks, which pass on their own cost advantage, due to a much smaller presence apparatus to coworkers on the spot, to their customers in the form of attractive financing elements, simply forced the German banking landscape to its knees and to rethink.
Mandatory prerequisites for lending a loan without equity
A sufficiently good credit rating of each customer is also fundamentally required when granting a loan without equity capital. A bad scoring of the information files does not fit into the picture of the German banks in lending.
In principle, customers who have an indefinite and secure employment contract can be considered for the award of a loan without equity capital. The income should be correspondingly high. Similarly, a clarified or intact family situation is a mandatory requirement. A full-funding credit applicant currently in an unfinished divorce will not be able to anticipate a positive decision on lending under these undeclared family circumstances, where the post-divorce payment obligations have yet to be determined.
Furthermore, a comprehensible and plausible calculation of the costs regarding the capital goods is inevitable. Age also plays a role in lending, in principle, young loan applicants in a full financing rather chances to obtain this full financing also, as a continuous and long planning security is assumed, compared to older applicants.
A second person, who secures the loan without equity is also urgently advisable, since banks still have a security drive. 2 People who hedge the loan are in doubt better than one who provides security for the bank. However, it is advisable to each customer in addition to a good calculation of the project, nevertheless, a nest egg, which can be used for unannounced incidental expenses.
|Credit with equity||financing
|Financing with 110% variant|
|purchase price||210 000 euros||210 000 euros||210 000 euros|
|Required loan amount||150 000 euros||210 000 euros||210 000 euros|
|equity height||60 000 euros||0 euros||0 euros|
|fixed interest rate||15 years||15 years||15 years|
|Initial repayment installment||2 percent||2 percent||2 percent|
|Borrowing rate pa||2.54 percent||3.54 percent||3.54 percent|
|Personal loan for the purchase costs||–||–||21000 Euro (about 10% of the purchase price)|
|Interest rate personal loan||–||–||5.99% pa|
|Monthly rate personal loan||–||–||177.10 euros|
|Interest costs Personal loan after 15 years||–||–||10 877.47 euros|
|Rate per month||794.50 euros||969.50 euros||1 146.60 euros|
|Cost of interest after 15 years||38 635 euros||91 541 euros||103 418.57 euros|
|After 15 years is residual debt||45 625 euros||127 031 euros||127 031 euros|
|Total running time until full repayment||20 years||29 years||29 years|
The interest rate on financing is significantly more cost-intensive when financing without equity.
For the 100% financing, the customer has to raise about 175.00 € / month more than the equity capital. With the so-called financing with the 110% variant the monthly costs are even with a plus of 352,00 € / month.
Also the interest costs are strongly differentiating. Total maturities are significantly higher than the equity capital loan.
Forms of the loan without equity
There are 2 relevant distinctions for loans without equity. One differentiates between the so-called 100% financing and the 110% financing.
For 100% financing, for example, only the purchase price is financed for a property. The additional costs of the purchase, such as the land transfer tax, is borne by the buyer. In the case of the 110% financing, the purchase price and the purchase costs are also financed by the full financing. The total equity can actually be here at € 0.00.
Possible pitfalls of loans without equity
Customers who wish to settle for equity-free financing see themselves exposed to a higher risk of over-indebtedness in the general comparison. They pay significantly higher interest rates and get worse terms. Banks are compensated for their potential credit default risk accordingly.
In addition to the significantly higher interest rate, longer repayment periods and higher monthly burdens also threaten. The higher monthly charges over significantly longer terms compared to loans with equity must be weighed urgently by the interested party in advance.
What to do if bad Private credit / credit rating?
A bad scoring of the information files, such as the Private credit and a concomitant insufficient credit rating to obtain a loan without equity are knockout indicators. In principle, customers with these requirements must be provided with sufficient collateral, which can certainly be very high. Co-buyers with a very good credit rating and good revenue structures who secure the purchase and stick to the loan amount are decisive.
Another variant is the use of private money brokers or the use of foreign money houses, such as Swiss banks, as the lending is not bound to Private credit information.
Current figures and interest rate developments
In the current phase of low interest rates, it is well worth considering loans without equity to purchase home ownership or the like. Young people in particular, who have not had the time to save their own capital, can start investing in old-age provision very early on.
In recent years, the trend for loans without equity has been well established and enjoys a brisk crowd of children. However, considering the mostly poorer conditions of the banks compared to financing with equity capital must also be considered.