You found this article because you entered the search term “credit without collateral” or a similar term. Of course, we would like to help you answer your search query, but they pose some challenges for us.
We do not know exactly what your search query is aimed at. Are you really looking for a loan where banks completely forego security? So you don’t want or can’t provide collateral at all?
Or are you concerned with the question of whether a loan can be granted despite certain creditworthiness problems, such as low incomes?
Perhaps you understand credit collateral only as additional collateral that banks can demand in addition to the collateral customary for a certain credit card.
Loan without collateral: an advance warning
Be careful when someone offers you a loan with no collateral. No bank in the world waives collateral, regardless of whether it is based abroad or in Germany.
And no bank grants loans without security and income, even if the income does not always have to come from dependent employment or another business activity.
A waiver of collateral and income would lead to an unacceptable and incalculable credit risk, which, if consistently thought through, could endanger the financial sector as a whole and lead to serious crises.
In Germany, as in all other countries, banks are required by law to carry out a credit check and, in addition, to seek adequate security to cover the specific risk of default.
So the question is never whether borrowers need to provide collateral. In principle, collateral is always required.
The question is rather to what extent borrowers have to provide collateral in order to be able to fulfill a specific loan request.
But I didn’t need any collateral for my overdraft. This objection may apply. Banks usually grant overdraft facilities on the basis of the incoming payments.
You have direct access to the checking account at any time and can, therefore, arrange for attachment of the account quickly or cancel the credit line overnight.
As a result, banks may waive collateral such as assignments in the case of overdrafts.
Short-term loans from special providers are also an exception. It is often only a matter of small loans that have to be repaid within 30 – 60 days. An initial loan often hardly exceeds the amount of $ 200.
If you also book the expensive additional options, you may not need any security.
These few exceptions do not change the principle: no loan without collateral.
So what is behind it when loans are offered without collateral in newspaper ads or online?
At best, such alleged offers go nowhere. Potential borrowers are lured with the promise that collateral is unnecessary.
But it turns out that security is required contrary to the promises.
Perhaps the credit customer will be asked to provide a so-called guarantor, who in reality is usually a co-signer. This third person is the real borrower.
In other cases, it is not about lending.
Perhaps only addresses and personal data are collected, which are then resold for a profit.
Perhaps the focus is also on the sale of financial products: insurance, pension contracts, financial products of all kinds such as savings contracts and others.
If you end up with such a semi-silk financial service provider, you may end up with overpriced accident insurance, but no credit.
Finally, there are the tough fraudsters who do not even bother to broker non-credit financial products. They only target their customers’ money and disappear as soon as they have cashed in.
These fraudsters charge upfront costs and are very imaginative. That is why an iron rule applies to every loan: no upfront costs, no matter how they are packed. First of all, a legally effective credit contract must exist, only then can claims for agency fees and interest arise.
Security for installment loans
The usual installment loans that you can apply for on the Internet are secured by silent assignments and, above a certain size, often by the obligation to provide a co-applicant (not a guarantor).
Additional security is generally not provided for in the highly automated lending of Internet loans and is generally not accepted.
For the assignment of the salary to be effective, sufficient freely available, attachable regular income must be available in order to be able to service the specifically requested loan.
The bank examines this precisely when it looks at the applicant’s income and assets.
The employer is generally not informed of any assignments of salary. The employer only learns of the assignment if there are problems with the repayment.
If the collateral due to the assignment of salary is not sufficient to grant the desired loan, a reduction in the loan amount and / or an extension of the term can still lead to success.
Another possibility is that several co-signers apply for the loan jointly and the co-signers together meet the creditworthiness requirements for the granting of the desired loan.
At some banks, a co-signer is mandatory if higher amounts, for example, more than $ 10,000, are requested.
It makes sense to have a co-signer if a signer is in principle creditworthy on his own, but cannot fully provide the necessary security for the desired loan.
In our opinion, a joint loan application does not make sense if the main signatory is practically not creditworthy and therefore cannot provide any security at all.
In such cases, it is better to have the applicant sign it by the second person alone.
Example: A couple wants to take out a loan of $ 10,000. The husband has no income. Here the wife should make the loan application alone.
The assignment of salary represents so-called security.
Of course, installment loans can be secured in addition to the salary assignment with other loan collateral. Aside from assigning vehicle credit as security, direct banks will rarely accept such collateral.
Primarily, sureties, mortgages, and liens on securities are considered.
These additional guarantees can make installment loans possible if a transfer of wages is not enough, or they can lead to better loan conditions.
House banks are most likely to accept such collateral.
Motor vehicle credit and collateral
Two variants are available for vehicle loan financing.
The earmarked car loan is usually a little cheaper than a normal installment loan.
The prerequisite is that the vehicle to be financed is assigned to the bank by way of a contract and the letter is handed over, as well as often a copy of the contract documents.
Every vehicle buyer can easily provide this security.
In addition, there must be economic creditworthiness – sufficient attachable income. Sometimes it can fail.
The problem can be solved if the bank allows a co-signer even for earmarked loans. Many banks accept another signatory. But some don’t.
In addition, there is always the possibility of financing the vehicle of your choice with a normal installment loan.
There is no need for a transfer of ownership by way of security, and co-signatories are gladly accepted.
General-purpose loans from direct banks are only marginally more expensive than dedicated car loans. The best deals can be easily found with a credit comparison.