Mortgage lending without or despite credit bureau – how does that work?
Posted On July 18, 2019
A mortgage without credit bureau?
We want to get to the bottom of this question. German banks are reputed to reject even the smallest loans from weak credit bureau. Why should it look different with a usually six-digit financing volume?
We should therefore ask the question a bit more differentiated: Construction financing without credit bureau and mortgage lending despite credit bureau entry?
- It is to distinguish between mortgage lending without credit bureau (that is, without credit bureau query) and despite bad credit bureau (ie with worse credit bureau score).
- A credit bureau inquiry is always necessary for the awarding of construction financing in Germany.
- The borrower must bring a certain minimum credit rating.
- Mortgage lending without credit bureau can be made possible through foreign lenders, such as Switzerland.
- Nevertheless, the land charge order is necessary as collateral for the loan.
How does a mortgage without credit bureau actually work?
Mortgage lending without credit bureau means that the lender waives a credit bureau request. For a bank based in Germany, this is unlikely. If you want to avoid a credit bureau request, you need to cooperate with a bank that is not based in Germany.
Many consumers may be familiar with the term “credit without credit bureau” or “swiss credit”. Both terms refer to loans granted by financial service providers from Liechtenstein, Switzerland and partly also from Austria.
There is an institution like the credit bureau unknown. In the past, mortgage lending from Switzerland was perceived not only because of the lack of information from credit bureau, but also against the backdrop of the exchange rate advantage between the euro and the Swiss franc.
Anyone who does not want to go to Switzerland for their construction financing without credit bureau in order to negotiate with the bank, depends on a mediator in Germany. There are certainly reputable providers who have been specializing in arranging these loans for many decades.
On the other hand, there are also numerous black sheep in the market, who instantly feel the plight of the applicant when they need a “loan without credit bureau”. These can be used for your own benefit. Typically, these candidates collect a processing fee without ever seriously attempting to lend.
How do you recognize reputable providers?
- There are no commissions or other costs except interest.
- The lending is not linked to the conclusion of an insurance policy or a home savings contract.
The framework conditions for a construction financing without credit bureau
Financial service providers from Switzerland, Liechtenstein or Austria also work according to the same business principles as German banks. This means that they do not distribute the loans on a “watering-can” basis, but also make demands on the borrowers. Anyone seeking mortgage lending without credit bureau has to
- Prove a residence in Germany.
- Be of age
- To prove a regular income.
- Can provide collateral.
Similar to a mortgage lending with a German lender seizes as security for a mortgage lending without credit bureau the land charge order as collateral for the loan.
What about the interest rates on Baugeld without credit bureau?
This question is quite justified. It is indisputable that a financial service provider in the case of mortgage lending without credit bureau charges slightly higher interest rates than a German bank.
The mortgage lending despite credit bureau
While a home loan financing without credit bureau can not be shown in this country, the situation is a bit different in the case of mortgage lending despite credit bureau. First of all, we have to consider the “degree of hardness” of the credit bureau entry. Anyone who has forgotten to pay the phone bill, may be reported by his provider as defaulting to the credit bureau. However, a formerly open amount of 30 euros has little impact on the final appraisal of mortgage lending. The situation is different, however, if really hard criteria are used, for example reminder notices or due credit.
Mortgage lending comparison
Despite existing credit bureau entries, the comparison of the financing conditions of various banks and intermediaries should also be at the beginning of the search in this case. Less serious entries such as the offending telephone bill described above are usually no obstacle to borrowing dar. A first overview of current conditions interested readers can see our comparison:
A credit bureau entry does not automatically mean that the borrower does not have sufficient equity or income to service the monthly installment.
In the case of a loan in spite of credit bureau, collateral also plays a role. A installment loan of 5,000 euros is more likely to be rejected by weak credit bureau than a mortgage lending under the same conditions. For the installment loan, collateral might have to be provided and valued in addition to the salary assignment. This seems to many banks as too much effort.
When it comes to mortgage lending, the property to be financed plays the central role as collateral. If the mortgage lending rate is still well below the actual mortgage lending value, the risk to the bank decreases accordingly. It turns out that, despite credit bureau, mortgage lending is qualitatively different from a classic installment loan.
However, those who actually fall through the grid at the banks, but still has the ability to look around on loan platforms that convey loans from private to private. Although these also make a credit bureau request, the rejection criteria are reduced only to hard criteria such as arrest warrant or pending personal bankruptcy.
credit bureau influences interest rates
However, borrowers should not forget that negative credit bureau entries, whatever their nature, certainly have an impact on interest rates. This applies both to the traditional commercial banks and to the private equity brokerage platforms.
Where does credit bureau actually get the data from?
For some borrowers, the answer to this question may well be of interest. The credit bureau itself does not collect any data. She collects them. Suppliers are banks and all companies that either work with loans or receive regular payments based on contracts, such as mobile phone contracts.
These companies pass on their “experiences” to the credit bureau. Exactly at this point, however, is the risk for the borrower. A mobile phone provider tells the credit bureau that a customer has not paid his bill. He omits, however, to tell the credit bureau, if the customer has paid in the meantime. As a result, the customer has an unauthorized credit bureau entry.
The credit bureau must first delete entries after the expiration of a period of three years. The legislator therefore provides that every citizen has the right to request a free credit bureau self-assessment once a year. He can thus compare whether the entries are justified or not.
We therefore recommend that all potential borrowers, whether in installment loan or mortgage lending, make use of this right. If in doubt, just make sure that an unjustified entry does not result in higher interest rates.