What is a personal loan?
There are very many different types of loans, these are used in their
the purpose of use, the term, the type of collateral, according to the creditworthiness (Schufa information).
The personal loan is the opposite of the mortgage loan.
The mortgage loan is secured by a mortgage (house, car), land charge or security land charge.
The personal loan is granted on the basis of creditworthiness (= financial reliability) as a blank loan or with loan collateral.
There are different types of personal loans, examples of a personal loan is about:
– the overdraft facility
– the supplier credit
The personal loan is a so-called unsecured bank loan, which is granted on the basis of the creditworthiness (= solvency) of the bank customer; this is done within the bank’s framework of trust.
Additional collateral provided by the borrower or third parties is not necessary here.
For larger sums, this type of credit is rarely granted because it requires a large amount of information flow and there must be at least a long-standing clientele or acquaintance to ensure the bank that the debt can be paid.
The balance sheet and the profit and loss account are usually decisive here.
However, this mostly concerns business customers.
In the case of private individuals, proof of the amount and regularity of an income is usually required.
The applicant’s assets must also be inspected here.
Current account overdrafts such as overdraft facilities and overdrafts tolerated by the bank are blank loans.
Smaller loans for purchases (acquisition loans) or holiday loans are also granted to good bank customers without the provision or provision of collateral.
The increased personal loan and its various forms
There is also the so-called “reinforced personal loan”, in which additional collateral (collateral) from the borrower is absolutely necessary.
Examples of collateral:
– Transfer of the vehicle registration document for car loans
– Assignment of salary entitlements
Most consumer loans* are increased personal loans (e.g. loans to finance a vehicle).
“*Loans granted for the consumption of goods and services (personal use) “.
A special form of the reinforced personal loan is the covered personal loan.
It is also the case here that securities are not sufficient.
Additional personal securities are required from third parties who can also be registered as contractual partners on this basis.
In the course of this service, contracts for sureties or guarantee contracts are often drawn up.
A secured personal loan is the known loan, in this loan the borrower’s home is managed as collateral.
It is often referred to as a homeowner’s loan and usually serves the purpose of carrying out various renovation and modernization measures.
It is unlikely that this loan will be used for properties that have not yet been purchased.
This form of credit is similar to a mortgage or construction loan, but repayment is more flexible than with these credit options.
Banks like to use this type of loan as it has one of the lowest risks.
If the borrower is unable to pay, it can fall back on the property.
The great advantage for the borrower is that very favourable conditions can be offered through this security.
Special payments can be made here at any time, also an increase of the monthly installment agreement can be accomplished.
This would mean that the loan could be repaid more quickly, thus reducing various costs. (account maintenance costs, service flat rate, interest etc.) can be reduced.
For a better explanation you will find a video here that will hopefully answer open questions.
If you still have any questions, please do not hesitate to contact your financial advisor.