If you want to conclude a new rental contract for an apartment, you have to include the money required for the rental deposit in your calculation. In many cases, paying a deposit for a planned new rental causes financial problems because the deposit for a new rental agreement is often due before the deposit from the old rental agreement has already been paid back.
If a tenant cannot then afford the additional deposit, there is practically no chance on the housing market. However, tenants who take out a loan for a deposit in such circumstances can close this funding gap.
Security bonds mean security for landlords
A deposit secures the landlord’s claims against his tenant if he fails to meet his payment obligations towards the landlord. Such payment obligations can arise from unpaid rent as well as from claims by the landlord to repair damage caused by the tenant to the landlord’s apartment.
Since every landlord wants to be sure that he does not stay seated for such claims, he demands a deposit from the tenant, i.e. a fixed amount of money deposited to satisfy such claims or a secure guarantee as from a surety loan, which he then, as a landlord, practically directly in the event of a case can access.
Take credit for a deposit
In order to take up a typical deposit loan, the tenant first concludes a guarantee and credit agreement with a financial institution. The financial institution undertakes to provide the landlord with a guarantee for the agreed deposit amount instead of the tenant. If the transaction is successful, the tenant and credit customer do not pay interest to the financial institution for the duration of the guarantee, but a so-called guarantee commission.
However, if the deposit has to be paid to the landlord, the guarantee is void. The tenant and credit customer then receive a loan in the amount of the deposit from his financial institution, which is then paid to the landlord. If this happens, the borrower must pay interest on the security loan to the financial institution and repay the loan there.
Costs and creditworthiness
A deposit can be financed through an installment loan or an overdraft facility. Tenants who take out a loan for a deposit open up a third, often better way to finance the deposit with a deposit loan, because deposit loans can be significantly cheaper than bank overdraft or installment loans. If you compare the amount of the guarantee commission of approx. 5% with the interest of an overdraft facility for the deposit amount, the advantage will quickly become apparent.
However, you should also note that a surety loan also requires sufficient creditworthiness. If there is insufficient income and other collateral is also lacking, solvent guarantors can also be sufficient for this type of loan to enable a surety loan.