If only little or no BAföG is received, a part-time job is not possible due to examination phases and support from parents is also unthinkable, studying can quickly become quite expensive due to the constantly rising cost of living. The Student Loan opens up the possibility of financing your studies independently and on your own responsibility. For students, a Student Loan offers numerous advantages during their studies, which is reflected above all in a quick degree.
Who is eligible for a student loan?
In principle, every student can take out a Student Loan. The credit institutions usually have the following requirements: creditworthiness (except for KfW), a certain age limit and, if necessary, German citizenship (except for KfW).
How much is the student loan?
The amount of the Student Loan is determined by the student himself, this can be up to €50,000. It is important to plan exactly in advance how long you want to be financed and how high the costs will be, e.g. if you are planning a semester abroad.
Student Loan Benefits
The special thing about the student loan is that it is basically open to every student, regardless of above-average performance or world view and - certainly the most important advantage - can be designed personally.
New design options
The Student Loan closes the gaps that exist in state funding (such as BAföG) and opens up new creative freedom in your studies.
Example: Studying abroad, which used to be simply unaffordable for many students, can be financed quickly and unbureaucratically with a Student Loan.
Targeted use possible
A student loan can be used specifically to finance the entire course of study or a specific phase of the study. A Student Loan in the final phase can avoid non-specialist work and thus create additional time resources for exam preparation.
Height can be determined by yourself
The student can determine the amount of a student loan himself. The financial institutions offer student loans from 1,000 to 50,000 euros. In principle, the student is also free to decide how the money is to be used.
In most cases, the payment is made in monthly installments, which the student can also determine. But there are also offers that are paid out all at once, for example a Student Loan to finance a stay abroad.
Why should you use a student loan?
The majority of students depend on several sources of income to finance their studies. According to the 18th social survey of the German Student Union, around 90 percent of students regularly receive financial support from their parents.
Parental support is often not enough
In most cases, however, this is far from sufficient to fully finance your studies. Therefore, 60 percent of all students work during the entire semester or during the semester breaks.
BAföG often not granted enough or not at all
In addition to support from parents, there are a number of other financing options. The Bafög is certainly the most well-known state subsidy. However, the approval is linked to the income of the parents and this means that many students have to work despite BAföG.
Education credit too low
The education loan is another form of state funding intended for graduation. Similar to the Bafög, the loan amount is limited and is a maximum of €7,200. In individual cases, this may not be enough to finance your studies.
Scholarships and Education Funds
Other funding avenues include grants and education funds. What they both have in common is that the funding is linked to above-average academic performance.
Grants from party-affiliated foundations also require that the grantee agrees with the party's principles and worldview. With the education fund, students receive study financing from a fund into which they pay a certain percentage of their income for a specified period of time when they start their career.
Conclusion: student loan as an interesting option for student financing
Those who are faced with the task of deciding how to finance their studies can now choose from many different offers. State subsidies, such as student loans or educational loans, are subject to certain conditions and are usually not sufficient to cover the entire cost of living.
The non-governmental subsidies require above-average performance and are therefore not open to everyone. Compared to these financing options, the student loan is a real alternative, as it is basically granted to every student, regardless of income and performance.
Apply for a KfW Student Loan Online in 10 Minutes
Apply for your KfW student loan online now within 10 minutes and secure up to €650 a month. Without any paperwork.
Apply for a KfW student loan now
Student loan providers
The financial institutions of the economy have developed a considerable range of offers for the financing of education. But state institutions also take part in the competition for students.
Every student who is interested in a Student Loan is therefore faced with a wealth of different products. The providers are banks and public institutions such as the savings banks, Raiffeisen and Volksbanken, the student union and the Kreditanstalt für Wiederaufbau (KfW).
Differences between providers
While the big banks, Raiffeisen and Volksbanken as well as the Kreditanstalt für Wiederaufbau offer their student loans nationwide, the offers from savings banks and smaller banks are usually limited to one federal state or one region.
Important: This is particularly important if you want to keep the option of changing to a university in another federal state or doing part of your studies abroad open.
Just like the state institutions, every company has its own Student Loan concept, which is expressed in the product design. Therefore, it is worth examining the student loans of the providers in more detail.
Student loans differ in individual cases not only in the amount of the loan and the costs, but also in the general conditions such as age limit or creditworthiness. In addition to the framework conditions, there may also be conditions regarding the subject of study, a change of subject or a change of location.
Checking the creditworthiness for a student loan
In general, every financial institution, whether private or government, conducts a credit check on the borrower.
Credit is the creditworthiness of a customer. It is determined using a catalog of criteria for which each bank has developed its own procedure. A central element for the creditworthiness is the Schufa information.
Note: The Reconstruction Loan Corporation is an exception. It does not carry out a credit check for a student loan.
Various names are used for the student loan
The designations for the student loan may vary in individual cases. For example, the terms Student Loan or educational loans are also common.
In the case of the latter, however, a precise distinction must be made between the state education loan, which is awarded by the Kreditanstalt für Wiederaufbau, and an education loan from a private financial institution.
The state education loan has a maximum amount of 7,200 euros, while an installment loan from the bank to finance your studies can usually be up to 50,000 euros.
What are the requirements for the student loan?
The approval of a student loan is linked to certain conditions that the borrower must meet.
These include general conditions such as:
- creditworthiness
- a certain age limit
- often German citizenship
In addition, many financial institutions have set up other criteria, such as credit protection.
Creditworthiness as the most important requirement
One of the key criteria for granting a loan is creditworthiness. This also applies to the Student Loan. Every financial institution checks the creditworthiness based on various characteristics in a so-called credit scoring, which derives an assessment of the customer's creditworthiness from the information on the customer's personal financial situation.
Credit check via Schufa
The creditworthiness is not only determined by the internal rating of the financial institution. A key factor in creditworthiness is the Schufa report, on which most banks make the creditworthiness of a customer largely dependent.
Before each loan is granted, the financial institutions send an inquiry to the Schufa. The Schufa (abbreviation for protection association for general loan security) is a company in the German banking industry.
Schufa collects data from consumers' payment transactions, from which their financial situation can be determined. This only happens with the consent of the customer, for example when opening a checking account, applying for a loan or a credit card. The financial institutions report this data to the Schufa.
For the banks, information on the customer's payment behavior is of crucial importance for the classification of creditworthiness. If a customer regularly pays the installments for an ongoing loan, the Schufa notes this positively.
Attention: If the customer does not meet his repayment obligations properly, this leads to a negative entry.
As a rule, the data is deleted by the Schufa after three years. The Schufa report is therefore of great importance for the classification of a customer's creditworthiness.
A borrower who has gone through personal bankruptcy proceedings (which are also reported to the Schufa) no longer has a credit rating.
Age limit
Another requirement for a student loan is the age limit, which is usually associated with the duration of the study. In general, student loans are granted without any problems if the student is within the standard period of study.
Some banks only grant Student Loans to graduate students. Every financial institution has its own regulations here.
Good to know: If a student has exceeded the standard period of study, this does not necessarily mean that their application will be rejected. As a rule, the loan officer has a decision-making power for such cases.
Often German nationality as a criterion
In most cases, this also requires that the applicant has German citizenship.
An exception is the Kreditanstalt für Wiederaufbau, which also makes the Student Loan available to foreign students from EU countries who have been in Germany for at least three years and are registered here.
There are also financial institutions that only grant credit to students in a specific subject or only within a region. This has a direct impact on whether a later change of subject or location to another university is possible.
Related Loan Post
Student loan amount – loan amount
One of the most important questions to be answered in advance of a student loan is the amount of the loan. How much money do you actually need to finance your studies? This can be planned through careful assessment, which should be given sufficient time.
The amount of a Student Loan influences many things in the long-term personal life and of course the credit costs incurred. The larger the loan amount, the higher the interest and installments.
However, it also makes no sense to underestimate the student loan. Because then you are forced to work during your studies, which reduces the advantage of the student loan again.
Attention: The loan amount also determines how much debt you start your working life with. And here it definitely plays a role whether you have to pay the monthly installments for a student loan of 20,000 euros or 50,000 euros at the beginning.
A catalog of criteria for the decision
The amount of the student loan can be determined using a catalog of selection criteria. You should go through this catalog of criteria before making a decision in order to take all important aspects into account.
Tip: Study financing also influences study planning and vice versa. Therefore, you should review your study planning before taking out a student loan. This is especially true if you want to keep the option of changing universities within Germany open or if you intend to study at a foreign university for a few semesters.
Determine the actual financial need
According to a study by the German student union, the majority of students finance their studies from several sources of income. This can include parents, Student Loans, a scholarship and your own work.
To determine the actual credit requirement, it is helpful to calculate the difference between the existing sources of income and the total study costs incurred.
Important questions you should ask yourself: What is your own income and what are the costs of your studies? How high does the monthly payment of the student loan have to be in order to secure the entire financing of the studies?
Determine intended use
Then it is important to determine the intended use of the student loan. Is it about financing the entire course or just the main course? How long will it take until you probably have finished your studies?
You should then make a realistic assessment of the monthly and annual costs of your studies. These costs are made up of the general cost of living (rent, food, public transport, leisure time, etc.) and study costs (teaching materials, tuition fees, copying costs, etc.).
Be sure to take into account possible increases in study costs
Once you have calculated your costs, it makes sense to take into account that certain cost factors can change over the course of several years.
Example: The cost of living can increase significantly if you later decide to change universities and move from a small town to a large city.
It is important in this context that some providers of Student Loans only operate regionally or locally and make the granting of the student loan subject to certain conditions.
Tip: If you want to study at different universities or complete a few semesters abroad, you should clarify to what extent this affects the loan agreement.
Often higher costs when studying abroad
Anyone who intends to spend part of their studies at a university abroad has additional financing requirements, e.g. B. due to higher living costs or tuition fees. This should also be considered before determining the amount of the Student Loan.
A semester abroad generally does not pose a problem in terms of financing. However, as soon as you want to stay abroad for a longer period of time, for example to obtain a degree from a foreign university, the need for financing increases significantly. If you plan and decide this before you apply, you can easily factor in the additional money you need.
Note: Some credit institutes also give students the option of granting a one-time additional loan if they decide to go abroad later.
Student loan costs & interest – How much does a loan cost?
The cost of a student loan is made up of several factors.
Tip: If you want to know how much you ultimately have to pay for the student loan, you should take this into account and not just let the annual percentage rate guide you when making your decision. The annual percentage rate is certainly an important cost factor, but just one of many. It is the focus of advertising and for good reason: it sums up all the costs incurred for a loan each year.
These include the nominal interest rate (that is the interest related to the loan amount), processing fees, payment rate (disagio), as well as the start, amount and duration of the repayment as well as interest and repayment settlement dates. Even with loans that have the same effective annual interest rate, there may well be differences in the individual items, e.g. the nominal interest rate or the interest settlement date.
The APR
The effective annual interest rate is given as a percentage per year based on the loan amount, for example 3.9% pa (per annum).
It is also important to distinguish between the effective annual interest rate and the initial effective annual interest rate. While the effective annual interest rate remains constant for the entire term, the initial effective annual interest rate changes.
The financial institutions are legally obliged to show the annual percentage rate of each loan in order to make the offers transparent and comparable for the consumer. The annual percentage rate only names the differences between loans that have the same fixed interest period. It is therefore not alone sufficient for the assessment of loans with different fixed-interest periods.
Student loan with a fixed or variable interest rate?
There are basically two types of interest payments for loans: loans with a fixed interest rate and loans with a variable interest rate. This interest (also nominal interest) refers to the loan amount and should not be confused with the annual percentage rate, which reflects all the costs incurred for a loan in the year.
Credit institutions offer student loans in both forms. With a fixed interest rate, the interest rate remains constant over the entire term. Variable interest is based on an initial interest rate that depends on general interest rate trends.
In principle, it is not possible to say which form of interest is better. With a fixed rate loan taken out when interest rates are high, the borrower cannot benefit if interest rates fall. Anyone who takes out a student loan with a variable interest rate bears a certain interest rate risk. If the interest rate level increases drastically, the cost of the Student Loan will increase accordingly.
Implications should be clear
When making a personal decision, it is very important to understand the impact of choosing a fixed rate versus a variable rate. A student loan can become more expensive or cheaper as a result.
Tip: To determine the actual cost of a student loan, it's useful to calculate the differences between a fixed-rate loan and an adjustable-rate loan based on fixed criteria such as the loan amount, disbursement rates, and repayment rates.
If you decide to take out a Student Loan with variable interest rates, you should find out how you can contain the risk of rising interest rates and what effects a general increase in interest rates can have on your personal student loan. You can get this information from the loan officer when you apply to the bank.
Loan protection options
Another cost factor can arise from securing the loan. Some financial institutions require the borrower to provide collateral and make this a condition for the approval of the loan. The reason for this is the financial institutions' interest in ensuring that the loan is repaid in any case.
Guarantors
A loan can be secured in a number of ways. One possibility is the provision of a guarantor. The borrower appoints a person who agrees to the bank to assume the repayment obligation in the event of insolvency. This is most cost effective option for the borrower.
Residual debt insurance
Another option is to take out insurance. Residual debt insurance is a procedure that is often used by financial institutions. A residual debt insurance steps in and takes over the payment of the outstanding installments if the borrower dies, falls ill or becomes unemployed.
Term life insurance
An alternative to residual debt insurance is term life insurance. It works on the same principle, but can mean more favorable conditions for the borrower in individual cases. If it is necessary to take out insurance, it makes sense to check and calculate both options.
Note: The residual debt insurance or term life insurance are part of the additional costs of a loan. You should therefore inquire when concluding a loan agreement whether they are included in the effective annual interest rate and what their exact cost share is.
Tips for financing your studies via the student loan
A student loan influences long-term life planning in many areas and should therefore be prepared thoroughly.
Before you sign a loan agreement, various points need to be clarified if you want to secure your personal creative freedom during your studies and keep the loan costs within limits.
Calculation of personal financial needs
First of all, it is important to estimate the financing requirements for the entire course. Students have the advantage over first-year students that they can draw on empirical values.
Tips:
- First-year students should seek talks with students in order to get concrete clues.
- Since student loans are usually paid out in monthly installments, it makes sense to record the average income and expenses per month in a table. Items that are only incurred once a semester or a year, such as tuition fees or semester fees, should also be taken into account.
- Determine monthly average: Calculate the total annual costs and annual income. The monthly gap, which results from the difference between average income and average costs, is an important value. This value is one of the main pillars for calculating the amount of the student loan. If this value is multiplied by the number of months that the course is likely to last, a first area of financing has been realistically assessed.
Allow for a later increase in tuition costs
For various reasons, the average estimated financing requirements for the course can later increase. This possibility should be taken into account before finalizing the loan amount.
Example: If you decide to continue your studies at another university and move from a smaller university town to a large city, you have to reckon with higher living costs, especially with rent and local public transport. This may also result in tuition fees.
Include study abroad as an option
Many students have the desire to study abroad for some time. If you intend to do this or at least want to keep the option open, you should also keep this in mind when concluding a loan agreement.
Attention: While a semester abroad usually causes manageable costs, the financial planning of a longer stay abroad makes greater demands. Those who cannot participate in a funding program must expect tuition fees.
There are also travel and living expenses, including rent. If you have decided to go abroad, it is advisable to find out the costs from competent sources, for example from students who have already spent time abroad. With a precise idea of the financing requirements for a stay abroad, you can accurately estimate the amount of the student loan that is actually required.
Clarify personal creative freedom
Some banks tie the granting of a Student Loan to certain conditions that can interfere with personal freedom. It is therefore important to check carefully whether a provider's student loan allows you to change your major or university.
Important: This also applies to intended practical semesters or vacation semesters, for example due to pregnancy or parental leave. Are there any requirements for studying abroad? Or other conditions for the student? These aspects are best clarified in conversation with the loan officer.
Choose a student loan with a fixed rate or with an adjustable rate
Another very important point when taking out a student loan is whether you choose a loan with a fixed or variable interest rate. A student loan with a fixed interest rate offers long-term planning security for the borrower, because he can calculate exactly how much the Student Loan will cost. However, he has no advantage from a later reduction in the general level of interest rates, since his interest rate is not affected.
A loan with a variable interest rate can become more expensive or cheaper during its term, depending on the current general interest rate development. With this loan, the borrower bears a certain interest rate risk. Some financial institutions offer the option of limiting this interest rate risk for loans with variable interest rates. A bandwidth for the variable interest rate is set in the loan agreement.
Early repayment of the student loan
In addition to all the criteria already mentioned, you should also clarify whether a special repayment or early repayment of the student loan is possible.
The early Student Loan repayment creates freedom for future financial planning and should therefore be included. As a rule, early repayment of student loans is possible, taking into account the statutory notice periods.
Have a personal consultation
After all, it is highly recommended to arrange a consultation before concluding the student loan agreement. Open questions can be clarified here. In addition, many financial institutions respond to the customer's personal situation and can offer better conditions than the standard offer. This includes, for example, an interest rate reduction through a guarantee from the parents, which makes the Student Loan cheaper.
0 Comments