Duration of processing loan applications

It only takes a few minutes to complete the application for a loan. But how long does it take to process through the bank? 

The duration of processing credit applications varies greatly. While private customers usually receive a quick response, companies often wait unnecessarily long for a loan commitment, as a recent investigation shows. The type of financing is also crucial.

Consumption of consumer loans much faster than corporate loans

A total of 36 German credit institutions have asked the auditing firm how long they need to process a loan application. While loan approval for consumer credit is now often possible within a few hours, companies sometimes wait weeks for the bank’s response – the longer the higher the turnover of the business.

Trend towards so-called “instant loans”

Creditworthy individuals with short-term financing needs benefit from the development at ever shorter processing times. Only six percent of banks surveyed still need more than five hours to process a loan application privately, with three quarters of institutions claiming to do so in less than 15 minutes. For pure processing time but still lying and transport times. Therefore, a so-called instant loan is not necessarily available immediately. Our bank is already a step ahead with its online signature credit . The loan amount is available immediately.

Longer waiting times for mortgage lending

SMEs with a turnover of less than 2.5 million euros, on the other hand, are waiting much longer for a loan. Here is an overview of how long it takes to process a loan application:

  • Two days or less: Only 17 percent of all banks manage this.
  • Two to five days: 44 percent of the banks take up to one working week.
  • More than five days: 39 percent of all banks are comfortable in processing.

Private customers, however, also have to expect longer waiting periods when they apply for mortgage lending. Compared to the predecessor study, the processing time in this area has even extended and in many cases is still several days. The background to this is that banks have to comply with much stricter requirements when examining the new home loan book directive.

Credit Loan: Avoid High Costs

Anyone who lives permanently in the Dispo pays high interest and is under stress. So it makes sense to balance the credit line as quickly as possible. 

This can be worth a installment loan: your account balance is immediately out of the target and the interest rates are significantly lower than the Dispo.

Checking account overdrawn – what now?

Checking account overdrawn - what now?

The Dispo (short for disposition credit ) allows to cover the current account. This can be very useful in different situations, for example when an urgent purchase is necessary and the salary has not yet been credited. But with the credit line caution is advised: Who does not compensate him quickly, but always strained, can fall into a debt trap. The disbursement rates are particularly high and can be three to four times the interest on a installment loan. So the checking account is slipping further and further into the minus. A possible step would be to make savings available and thus to balance the MRP. But often this is not possible – otherwise the account would not have been overdrawn in many cases.

Debt credit balance with a installment loan

Debt credit balance with a installment loan

An easy alternative to get out of the red is to take out a installment loan. You can use the total to directly clear the credit line. It is best to choose a sum that is slightly higher than the amount by which you have overdrawn the checking account. This will help you to avoid falling again immediately. As a result, you pay back the loan in manageable monthly installments. The interest costs are significantly lower than if the collection is used permanently. For example, our bank’s instant loan can be quickly and easily applied for and is available within a short time.

Long-term goal: life without discretionary credit

Long-term goal: life without discretionary credit

There are several measures you can take to avoid recourse soon. Ideally, you will find a way to increase your earnings, for example, through a salary increase or a side job. But easier said than done – in many cases this is not so easy.

Then it says: Reduce spending. A household book can help you keep an eye on your expenses. Often the monthly fixed costs can be reduced by canceling superfluous contracts. Even a change to a checking account with better conditions can make sense: With a free account you save money every month and lower interest rates are an advantage in case you have to cover again.

What do the Germans take out loans for?

Woman with glasses and hat in front of a painted wall

The Germans are currently more willing to take out loans to fulfill their wishes or make important purchases. But what exactly do you finance with a loan? 

In times of low interest rates, it is known to be particularly beneficial to finance larger purchases with a loan. This is also reflected in the consumer credit index, which the Duresearch institute (DI) calculates twice a year for the banking sector association. It is currently at 129 points, the highest since its launch five years ago.

The index is composed of the acquisition planning and the financing planning of the respondents. Overall, in its representative study, DI surveyed 1,904 people as to which major acquisitions they are planning in the next twelve months and whether they would like to finance them through a loan. The result: With the acquisitions a stable development is to be expected, the financing readiness is even slightly rising. The favorable lending rates are making themselves felt and more and more consumers can imagine this form of financing.

Cliché of the darling child of the Germans at least applies for loans

Many respondents are willing to finance a new car through a loan : 48 percent can imagine that for a new car, 37 percent for a used car. This makes car buying the most frequently used purpose for a loan. However, only four percent (new cars) and seven percent (used cars) of German citizens are planning this large acquisition for the coming year. It is striking that the readiness for financing in used cars has risen significantly more sharply compared to the previous year than for new cars.

Home sweet home, luck alone: ​​Renovation and furniture increase

In third place are furniture and kitchens when it comes to the willingness to borrow. 19 percent want to set themselves up with a loan. Even for a renovation or a move, nine percent can imagine using a loan. In these two areas, financing planning has risen sharply, so especially many Germans are currently willing to provide a home loan for a comfortable living. For purchases in the field of consumer electronics, significantly more consumers are now willing to take out a loan than last year.

On holiday, the Germans are stuffy

A larger holiday is a potential use for a loan only for two percent of respondents. Although the willingness to finance has risen slightly, it is still the area where very few consumers choose to take out a loan. Although 26 percent of respondents plan a larger holiday in the coming year, but this is ironically spared in most cases. According to a study by the bank, holiday travel is the most frequent savings target for Germans.

Unexpectedly, apparently also comes with larger purchases often

Asked by opinion pollsters if they plan to make larger purchases in the next 12 months, 48 ​​percent said yes. More than half of the respondents are therefore not expecting more spending in the coming year. A look back, however, shows that things often turn out differently than expected: in relation to the past twelve months, 61 percent said they had made larger purchases. Especially with large household appliances, a significant part of the purchases are unplanned: Almost half of the respondents said they spontaneously bought household appliances. After all, it is seldom possible to predict when, for example, the washing machine will give up the ghost and have to be replaced. It is to be expected that the actual purchases and thus also the taking out of loans will ultimately be higher than the consumer credit index suggests.

 

Germans exemplary in loan repayment

The figures of the private credit give the Germans a good testimonial when it comes to the repayment of loans. 

In addition to the reliable loan repayment, the borrowed loan amounts rise and the terms of the loans are getting longer and longer.

Credit repayment usually runs smoothly

The current credit compass of the credit agency private credit provides pleasing information about the payment behavior of the Germans: 97.8 percent of the loans were repaid in 2016 without any problems. This is the highest value in ten years and represents an increase of 0.2 percent over the previous year. Even young borrowers prove to be very reliable in the loan repayment: Among the 18 to 19-year-olds, the repayment rate of 98.1 percent is even higher than the national average. Given the good payment behavior private credit has saved over 90.7 percent of German consumers only positive features.

Higher credit sums and longer terms

Higher credit sums and longer terms

The sums borrowed by the Germans have increased in recent years: in 2016, 36.6 percent of all borrowers chose a loan amount of 10,000 euros or more. This share was 34.5 percent in 2015 and 31.2 percent in 2014. The loan amounts also increase the maturity of loans taken: the average maturity was 48.6 months last year, an increase of one month over the previous year and a new high of ten years.

Credit comparisons are becoming more frequent

Credit comparisons are becoming more frequent

The number of Germans who obtain information about the terms and conditions of various banks before borrowing increases. In 2016, the private credit recorded 22.9 million condition requests. Compared with 2015, this represents an increase of 17 percent. With such a request for a condition the banks inform themselves at the private credit about the creditworthiness of a potential borrower. The result affects the conditions at which the applicant is offered a loan. Unlike concrete loan requests, condition requests are only stored for a short time at the credit agency and have no effect on the private credit score of the consumer. However, the number of loans raised in 2015 and 2016 was 7.7 million. So the Germans like to get several offers in advance, before they finally decide on a bank.

Best-known Foundation: Online loans in the test

Young couple sitting on a sofa and researching together on the Internet

Online loans are the trend. According to the German Bankers Association, in 2015, already a quarter of the loan agreements were concluded on the Internet. 

Reason enough for Geofoundation to take a closer look at the offers on the internet. The conclusion is almost entirely positive.

Significantly more favorable conditions for online loans than in the branch

Significantly more favorable conditions for online loans than in the branch

Compared to the previous year, the proportion of online loans has risen by five percent. Consumers should probably have convinced the more favorable conditions compared to the offers of the branch banks, according to the assessment of the consumer protection organization. Some of the interest rates differ by more than three percentage points. And as determined by Geofoundation, the online providers generally keep their interest promises. Deviations are possible, however, if banks grant credits depending on their credit rating. In the test, however, these were in favor of the borrower: Due to good credit rating, the subjects were in some cases loan offers with a cheaper interest rate than stated on the website of the provider.

Geofoundation certifies good user guidance – with one exception

Also on the application for the online loans, the goods testers had little to suspend. Twenty of the 22 tested banks guide their customers straightforwardly and clearly through the loan application and provide them with all relevant information. However, one bank failed: Agibank provided information to the private credit credit agency, which had a negative effect on the Applicant’s private credit score. A credit check with the private credit is quite common, as well as learns the credit bureau from the bank, when a consumer at a bank conditions for a loan request. However, this so-called “request credit terms” has no influence on the credit rating of the consumer. However, Agibank sent another request to the credit agency, which had a negative impact on the creditworthiness of the customer.

Keep your eyes peeled for the remaining debt insurance

Some providers of online loans also had to take criticism because they tried to persuade the applicant to take out residual debt insurance through presettings. Such insurance may make sense for higher loan amounts, but for smaller loans it is often not necessary. Ultimately, the conclusion of such insurance should be a deliberate decision of the customer. For Agibank, IKD, Parabank and Camibank, however, the policy was already automatically selected in the application, so there is a possibility that borrowers may close it by mistake. The General Public Bank even made unsolicited offers with residual debt insurance.

Every second German would take out “career loans”

The Germans are ambitious: 83 percent of working people want to further improve their job opportunities. This is the result of the representative study “Career Requirements” of our bank. Many respondents want to continue their education, study or go abroad to gain work experience. But often lack of funds for the career surge. 46 percent would therefore be willing to take out a loan for further qualification.

At the top of the list of career aspirations are language courses. 29 percent would like to learn a new foreign language or refreshed to get ahead in the job. 26 percent have even higher goals: They want to start their own business or start their own business. 25 percent would like to go abroad to work there. An education, training or retraining wish 23 percent.

Frequently, career plans of this kind are not put into action because of the lack of money. Anyone who has already completed training or studies, shuns the cost of additional training, a second degree or coaching. Others flirt with a thesis for which they have to give up the job temporarily – but have no reserves to finance the livelihood during the doctoral period.

Lending for self-employment particularly in demand

Almost every second person is considering taking out a loan to achieve their career goals. If you ask the Germans what they would actually use the money for, the start of self-employment is clearly ahead. Eighteen percent of working people can imagine becoming entrepreneurs with the help of a loan. Eleven percent would use the loan to finance education, training or retraining.

Respondents aged 18 to 24 are particularly open to this possibility: 69 percent of them would be willing to realize their career aspirations with the help of a loan. Here, too, the first place is self-employment – 29 percent would take a loan for it. For 23 percent, a loan is eligible for study and 22 percent would finance a training or further education with a loan.

Continuing education boosts employer attractiveness

The desire to obtain further education is also reflected in the expectations that Germans have of their employers. 34 percent expect their company to provide or support training. Thus training as a selection criterion is on par with “above average payment”. However, respondents are even more important: good working atmosphere (67 percent), flexible working hours (49 percent), career opportunities (40 percent) and teamwork (35 percent).

For the group of 18-24 year olds, further education is even the third most important criterion when choosing an employer. 47 percent of young respondents expect their company to do so. More important for this age group are the good working atmosphere (74 percent) and career opportunities (64 percent).

For the study “Career Requirements” of credit bankive, 1,006 participants, ages 18 and up, were surveyed online. The results are weighted and representative of the German population over 18 years old. The survey was conducted by the market research institute  in the period from 3 to 5 September 2013.