Foreign loans and foreign currency loans: what is it?
Foreign loans are loans that come from foreign banks abroad. If foreign banks, for example through a branch, grant loans in Germany, by definition they are not foreign loans.
Foreign currency loans are loans that are not granted in the local currency. In concrete terms, this means that foreign currency loans are loans in a currency other than the USD.
Foreign loans can be both foreign currency loans and loans in local currency (USD). It does not matter whether the lending bank is based in a USD country or not.
Foreign currency loans can be foreign loans. Then they are issued by a foreign bank based abroad. Foreign currency loans can also be domestic loans.
Then they are issued domestically by a domestic bank, for example a German bank.
Most German banks provide their customers with foreign currency loans on request. Such foreign currency loans are in particular demand from companies that are active in the export and / or import business.
Loans from abroad without private credit checker in Germany
The usual loan without private credit checker is a foreign loan, but not a foreign currency loan.
All German loans without private credit checker ultimately come from Liechtenstein-based Sigma Kreditbank AG. They can be requested directly online there or they are mediated by credit intermediaries..
You can find more information on foreign credits without private credit checker on a separate page.
As far as can be seen, no other private credit checker-free loans are sold in Germany.
Take out foreign loans abroad without private credit checker
The first question with a foreign loan is: Under what conditions is borrowing abroad feasible at all?
If the loan is taken out from a bank in the USD area, there will be no fundamental difficulties.
The situation is different with foreign currency loans. Lending to foreigners is only possible in certain countries if certain restrictions are observed.
The easiest way to obtain a loan, whether in foreign currency in USD or in a foreign currency, is if the borrower is domiciled abroad and the loan is intended for an investment abroad.
In all other cases, private individuals will encounter technical difficulties in borrowing.
Foreign banks regularly expect a local loan. The borrower must appear in the bank’s business premises for the loan negotiations and loan completion. Of course, this is associated with costs.
An alternative is to use a credit broker with whom the foreign bank is ready to cooperate.
Credit brokers don’t work for nothing. The foreign bank will not want to pay the commission of the credit marketplace. It should always be up to the borrower.
The second question is: How does the foreign bank handle the credit check?
First of all, the bank will have the usual income requirements. It will require appropriate evidence and special security.
It is generally believed that good income and assets, as well as adequate collateral, play the essential role in granting foreign currency loans abroad.
The bank will also evaluate publicly available sources. This includes official debtor registers from Germany.
Bankruptcy, arrest warrant or affidavit may not be characteristics that particularly spur a foreign bank’s willingness to lend. A loan rejection is more than likely.
As already explained in the introduction, banks do have access to private credit checker data through the Association of European Credit Bureaus.
There is a high probability that foreign banks in Europe will take advantage of this opportunity, especially with higher loan amounts.
Conclusion: From a purely formal point of view, private credit checker’s credit rating may not apply to international loans. However, this does not automatically mean that the creditworthiness requirements are relaxed.
Applicants in very good income and financial circumstances are most likely to succeed if they can provide collateral that reduces the foreign bank’s credit risk to zero.
If applicants cannot meet this requirement, borrowers who do not get a loan due to poor score values in Germany will also go away abroad empty-handed.
By the way, foreign banks can have the credit check done by the German customer themselves.
This is not a problem with the submission of current self-assessment information at private credit checker.
Foreign currency loan with risks
Foreign currency loans can offer interest benefits and currency gains. In our opinion, the risks outweigh the risks for private individuals.
All foreign currency loans include currency speculation.
If the foreign currency develops more favorably than the home currency during the term of the loan, an amount that exceeds the original loan amount must be paid back.
Exchange rate risks can be minimized by entering into counter-transactions. Such counter transactions are of course also offered or brokered by banks. But this creates additional costs.
Currency risk is not the only risk.
Banks mainly issue foreign currency loans as term loans with variable interest rates.
The annual interest rates are not guaranteed over the entire term, but only for, for example, three months or one year. If the interest rate level increases in the foreign currency country, additional costs arise.
The borrower generally bears the interest rate risk.
Banks that issue final foreign currency loans often expect to have a repayment vehicle (life insurance or other financial products).
Apart from the closing costs for the repayment vehicle, an obligation to make additional payments when the loan expires may be necessary if the volume of the repayment vehicle is insufficient.
Borrowers therefore tend to make the repayment volume larger than is initially required. But such a buffer ties up unnecessary capital.
If the foreign currency loan is taken out at a foreign bank, additional account management fees may arise.
Foreign currency loans are paid out in the foreign currency and repaid in the foreign currency. Interest payments must also be made in the foreign currency.
The foreign currency must therefore be exchanged for USD for payment and for repayment from USD to the foreign currency.
The borrower must perform a spot sale to pay the loan and a spot purchase at the current exchange rates to repay the loan. All of these transactions are chargeable.
Foreign currency loans without private credit checker, this is more of a search term to enter on Google than that this term describes the solution to a credit problem.
Incidentally, the usual credit check is of course carried out for foreign currency loans granted by German banks.
In Germany, the involvement of a credit reporting agency is mandatory before lending.