Secure a car loan despite average credit at fair interest rates
5 Jun 2025
11
Minutes
Katrin Straub
CEO at nextsure
Are you dreaming of a new car, but your credit rating is only average? Many fear high interest rates or rejection, but that's often unfounded. Discover how you can improve your chances of getting a car loan at fair interest rates despite having an average credit score, and which steps are crucial for achieving this.
The topic in brief and concise terms
A moderate credit rating (SCHUFA score of 90-97%) is not an obstacle for a fair car loan; good preparation is crucial.
Improve your terms actively by making a down payment, adding a second borrower, or opting for a shorter term.
Use SCHUFA-neutral condition requests for credit comparisons and critically assess the necessity of expensive residual debt insurance policies.
Understanding Your Creditworthiness as the Key to Fair Loan Interest Rates
A medium credit rating is not a disqualifying factor for a car loan. A SCHUFA score between 90 and 97 percent indicates a manageable risk for the bank. Before you apply, you should know your exact creditworthiness. You can request a free data copy once a year from SCHUFA under Article 15 of the GDPR. Many consumers do not know their exact score value, for example, 94 percent. A realistic household budget and awareness of your own score are the basis for successful negotiations. With this information, you can specifically search for offers that suit your financial situation.
Actively improve credit conditions through targeted measures
You have several levers to influence the loan conditions in your favour. A higher down payment of, for example, twenty percent reduces the loan amount and the risk for the bank, which often leads to a lower interest rate. Another option is to take out the loan with a second creditworthy borrower. The bank then assesses the joint creditworthiness, which can increase the chance of approval by up to fifty percent. Also consider shortening the term; shorter terms mean higher monthly payments, but the total interest costs are significantly reduced. Financing without a down payment is possible, but usually leads to higher interest rates.
Here are four effective ways to improve your negotiating position:
Make a down payment: Even a down payment of ten thousand euros on a purchase price of 40,000 euros can reduce the interest rate by up to one percentage point.
Add a second borrower: A partner with a SCHUFA score above 97.5 percent significantly increases the likelihood of approval.
Optimise the term: A term of 48 instead of 72 months can save several hundred euros in interest.
Specify the purpose: A purpose-specific car loan for new vehicles is often cheaper than an unrestricted instalment loan, as the vehicle serves as collateral.
By combining these measures, you demonstrate to the bank that you are a well-prepared and low-risk borrower.
Strategic Credit Search: Comparing Offers Correctly
Do not rely solely on the dealership's offer. Dealer financing often includes hidden costs within the purchase price. An independent comparison of at least three to five banks is crucial. It's important to request a "quotation" from the banks instead of a "credit inquiry". Quotations are SCHUFA-neutral and prevent your score from deteriorating due to too many inquiries. Many online comparison portals routinely use this type of inquiry. This way, you can compare interest rates for a car loan without affecting your SCHUFA score safely. Specialized credit brokers can also be a good starting point, as they often work with banks that have more flexible assessment criteria.
Expert Tips: Legal Pitfalls and Savings Potential
Banks are legally required to conduct a creditworthiness check, as stipulated by § 505a of the German Civil Code (BGB). However, you have the right to check your data stored with SCHUFA. You can have incorrect or outdated entries deleted. An unpaid mobile phone contract over 150 euros can already negatively affect the score. The deletion period for settled loans is generally three years. Our expert tip: Critically assess the need for payment protection insurance. This often adds thousands of euros to the cost of the loan and is not mandatory. A life insurance or disability insurance policy can be a cheaper and better alternative.
Flexible financing alternatives to the traditional installment loan
In addition to the traditional installment loan, there are flexible financing models. The Three-Way Financing offers low monthly installments and at the end three options: purchase, return, or follow-up financing of the final installment. Leasing is another alternative where you only pay for usage, but the vehicle remains the property of the leasing company. This can provide tax advantages of up to thirty percent for the self-employed. For new drivers, a special car loan for beginners with parental guarantee can be a solution. Carefully weigh the pros and cons of each option to find the right solution for your personal circumstances.
Long-term optimisation by refinancing an expensive loan
If you have already taken out a car loan with high interest rates, refinancing may be worthwhile. If your SCHUFA score has improved since signing the contract, you can often obtain a new loan with interest rates two to three percentage points lower. Be aware of the early repayment compensation for settling the old loan prematurely. This is legally limited to a maximum of one percent of the remaining debt for consumer loans. If the remaining term is less than twelve months, the limit even decreases to 0.5 percent. Careful calculation of whether the interest savings exceed the compensation is key to success here. With an online calculator, you can quickly determine your savings potential.
Request an individual risk analysis now: Get your insurance situation checked for free and receive specific optimisation suggestions.
More useful links
The consumer advice centre explains how to identify misleading credit offers and highlights common pitfalls.
The Federal Statistical Office provides datasets and statistics on loans and online transactions.
The German Bundesbank provides statistics on interest rates and returns for consumer loans to private households.
The consumer advice centre offers tips on how to save on loans and credit.
The consumer advice centre provides assistance with financial bottlenecks and payment difficulties.
The consumer advice centre explains the background, advantages and disadvantages, as well as potential pitfalls of zero-percent financing.
The consumer advice centre informs about impermissible bank charges and fees for loans.
FAQ
What exactly does medium creditworthiness mean?
Average creditworthiness means that you are considered creditworthy, but there is a slightly higher risk of default for the bank compared to top creditworthiness. This is often associated with a SCHUFA base score between 90 and 97 percent. In this range, lending is likely, but the interest rates could be higher than for applicants with a score above 97.5 percent.
How many credit inquiries should I make at most?
The number of loan enquiries is less important than the type of enquiry. You can make as many SCHUFA-neutral ‘condition enquiries’ as you like without affecting your score. However, avoid binding ‘loan enquiries’ as several of such enquiries within a short period may be interpreted by SCHUFA as a sign of financial difficulties and could lower your score.
What documents do I need for the loan application?
You will generally need the last two to three payslips, your bank statements from the last three months, a copy of your identity card, and if applicable, a copy of your employment contract. For a purpose-specific car loan, the bank will also require the vehicle registration certificate Part II (logbook) as security later on.
Does a guarantor help with medium creditworthiness?
Yes, a guarantor with excellent creditworthiness can significantly improve the chances of getting a loan and lead to better interest rates. The bank has additional security through the guarantor. However, even more effective is a second borrower, as they are jointly and severally liable from the outset.
Can I repay a car loan early?
Yes, you can repay a car loan early, either in full or in part, at any time. The bank is allowed to charge an early repayment penalty, which is legally capped at a maximum of one percent of the remaining debt. If the remaining term is less than one year, it is only 0.5 percent.
What is the difference between the nominal interest rate and the effective interest rate?
The nominal interest rate (or nominal rate) is the pure interest rate for borrowed money. The effective annual interest rate includes not only the nominal rate but also all other costs and fees associated with the loan, such as processing fees. Therefore, you should always use the effective annual interest rate to compare loan offers.
