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Especially when it comes to finance and credit, there are many terms that need to be known. To make sure you are always well informed, we have explained all the important terms for you here. From A for expiration date to Z for fixed interest rate – here you will find everything you need to know in one overview:
The maturity benefit is the amount paid out by the insurance company at the end of the contract. This amount is made up of two parts. The first part is the guaranteed sum insured. This sum is guaranteed by the guaranteed interest rate and is fixed when the contract is concluded. In addition, the surplus share is paid out. This can also be called profit sharing.
The insurer determines the current maturity payment annually by means of a current extrapolation. This is communicated by the insurer to the policyholder.
Frequency of conclusion
The term frequency indicates how often the account is closed in a year. This means that the account balance is determined. This is done by listing and settling all individual dispositions. This is called the closing of the account. In the general terms and conditions of business or in the agreements for individual services of the bank, this closing frequency is determined. The account is usually closed on a monthly, quarterly or full-year basis.
The term amortization understanding the planned repayment of a debt. Originally the term came from the french. The term is to be used in economic and energy terms. In finance, amortization refers to the process by which investments that begin are covered by developing income during the amortization period.
It is called annuity the total amount of principal and interest that must be paid annually on a loan. This loan is also known as an amortization or repayment loan. amortizing loan. In order to keep the amount to be paid annually at the same level, the repayment rates and interest must be equalized. Due to the repayment, the interest rate changes annually, which is always calculated from the existing residual debt. The repayment portion must then increase because the value to be paid decreases due to the lower interest rates. Annuities can be paid as a full amount or in installments. This must be negotiated with the lender. Usually it is agreed to make these payments monthly or quarterly. Thereupon the burden is divided by the interest rate.
A annuity loan is a loan for which the sum of repayment and interest remains constant over the entire repayment period. If the annuity remains the same, only the ratio of repayment and interest changes. The interest rate is always added to the remaining debt. If the residual debt is reduced, the interest rate is also reduced. In order to keep the amount to be paid the same, the redemption part must then be increased.
There are loans with decreasing or falling annuity. In contrast to annuity loans, the repayment portion is fixed. This changes the burden, since the interest portion falls and thus the amount of repayment and interest is lower.
If amortization guarantee this is a payment that the guarantor must make if the principal debtor does not have enough funds available to pay the loan and even with the main enforcement of the assets the amount could not be covered.
The guarantor does not have to pay until all other values specified as collateral have failed and all other collateral has been realized. This is a modified default guarantee.
This form of guarantee is usually available to companies to secure a loan. The guarantor is only responsible in the event that the capital cannot be paid by all the securities and deposits. companies that do not have enough collateral for a loan can thus obtain a loan.
After the conclusion of a loan, the amount of money will be paid only when all payout requirements have been fulfilled. each credit institution sets these requirements individually. In general, however, the following points are uniformly required:
– the credit agreements must be signed in full
– if real estate financing is involved, the documents relating to the property must be complete.
– for safety reasons, it may be necessary. Salary assignments are submitted.
– the information from schufa must be positive.
These payout requirements are legally established. If there are irregularities or fraud, the bank may withdraw the credit, resp. Place an ad. It is therefore necessary to pay attention to the correctness of the data.
With the processing fee it is a one-time fee charged for the processing of a loan application. The banks use this to cover the administrative and processing costs incurred. The credit amount is increased by the sum of this amount. Some banks also reduce the amount paid out by this value. In order to attract more customers, many credit institutions have recently waived the processing fee.
This fee is different for each credit institution. Therefore, the conditions of a loan can only be compared on the basis of the annual percentage rate of charge.
Limitation of the credit commitment
The time limit of the credit commitment is understood to be the agreed period of time between the credit commitment by the credit institution and the acceptance of the loan by the borrower.
Once the loan agreement has been reviewed and the framework conditions have been negotiated and established, the lender makes a loan commitment. But only if all the conditions are met. The bank sets a time limit on the credit commitment. This means that the borrower has a certain period of time to decide whether to accept the loan or not. This period can be for example two weeks.
If the customer does not respond within this period, the bank may withdraw the commitment and cancel the loan offer. If the customer wishes to take out a loan, he must now submit a new application.
A blank credit is a loan granted without collateral. There are also mixed forms, where only a part of the amount is given without security. This is then a loan with a blank portion. In order for the borrower to receive such a loan, it is mandatory that the borrower’s creditworthiness is proven. especially new companies and medium sized businesses prefer this type of credit. this will allow them to take out additional loans, if necessary, for which collateral must be provided.
To obtain a blank credit, many conditions must be met. For this purpose, the bank examines the equity ratio, the financial structure, the earnings position and the capital base in connection with the asset position. Even if all these points are satisfactory, it is not easy to get a blank credit.
credit rating is another word for the creditworthiness of a person or a company. The quality of the solvency of a debtor is also described here. the creditworthiness of a borrower is a decisive measure of whether the customer will receive a further loan or a bond.
There are rating agencies all over the world that check the creditworthiness of a private individual or a company at regular intervals. For private individuals, this rating is carried out by schufa. Banks look at these scores when loans are requested from them. In the case of companies, the overall economic environment and the company-specific environment are the most important factors in the assessment. Here there are grades from AAA – D, with D being the worst grade.
With credit analysis is the term used to describe the procedure used to assess the solvency of a debtor. The personal and also the factual situation of a debtor is checked. The objective analysis of creditworthiness is concerned with the available income after all obligations have been deducted. In the case of personal loans, on the other hand, it is also checked, for example, how long you have been employed by the same employer or how often you have changed employers. Furthermore, you look at how many people live in the household, how you have dealt with credit in the past and much more. With all this information, the lender wants to make sure that the borrower is still able to pay the current loan installments after deducting all his costs.
Gross loan amount
The gross loan amount includes all costs incurred when applying for a loan from a bank. These costs include processing fees, interest, residual debt insurance and other ancillary costs. So, when you need a loan, all these additional costs are added to the desired loan amount, so that the final gross loan amount is a lot higher than the desired or requested amount. The borrower should therefore be aware that his monthly charges will then be considerably higher than he had imagined.
The guarantee describes the following process: if you apply for a loan, then you also need a guarantor. The guarantor undertakes to pay the debt if the borrower is no longer able to do so. The guarantee is defined in BGB §§ 765 ff. Legally regulated. There are different types of guarantees. However, they all have one thing in common: the creditor or borrower does not incur any obligations under a surety agreement. all guarantees must always be preceded by a principal debt. in business, the guarantor is usually a bank that guarantees the debtor’s liabilities.
The term loan is described in the BGB §§ 488 ff. Explains and means nothing more than that the borrower agrees to repay money or other things at a certain time in the same type and amount. If you take out a loan or credit in the form of money, then interest is added to the later repayment. A loan is therefore nothing more than a money loan to a third party. The prerequisite for this is always the loan agreement. In it, all basic agreements are recorded in writing. There are different forms of loans, which are named according to the term, e.g.B. Does construction financing belong to the longer-term.
The overdraft facility is also called an overdraft. It belongs to a private checking account and allows the owner to overdraw this account up to a certain fixed value. this value is tied to the monthly net income of the account holder. With the overdraft facility there are no fixed repayment agreements, nor is it tied to specific purposes. As a rule, this value is three times the net income. For the overdraft facility, the interest accrues on a daily basis. they are also called overdraft interest and are settled by the bank on a quarterly basis. These interest rates are based on the current interest rate market. the overdraft facility is a convenient way of obtaining money in the short term without having to apply for credit.
effective interest rate
As effective interest rate the interest rate is the interest cost of a loan for the whole year. However, this does not include the costs such as the account maintenance fee, provision interest and the like. This is regulated in the price information ordinance. The effective interest rate is mainly intended to allow the borrower to better compare the cost of the loan with different banks. as a rule, the effective interest rate differs from the nominal interest rate stated in the contracts.
In the case of overdrafts by private individuals, the effective interest rate does not have to be stated if the interest settlements are not made at intervals shorter than 3 months. This is stipulated by the BGB in § 493.
The fixed interest also called nominal interest. It is contractually agreed between the borrower and lender. The fixed rate is valid for the entire duration of the contract. This type of interest is often found in the securities business. This also includes the savings business. Here, for example, the savings bond at the bank is to be mentioned. Here, too, the interest rates are fixed for the term of the savings bond.
In the case of construction loans, the fixed interest rate is often only valid for ten years. the bank can then adjust it to the economic situation. If the customer does not agree with this offer, the entire remaining amount will be due in one swoop. However, there is a possibility of debt rescheduling.
Household lump sum
The budgetary lump sum is closely linked in the credit business to the creditworthiness assessment. It belongs here in the income-expenditure account in the area of living expenses. It is therefore the minimum amount to maintain the normal standard of living. This flat rate varies from bank to bank. However, it is very closely linked to the social assistance rates. There are no legal regulations in this area. the household allowance therefore includes, among other things, the cost of food, housing, clothing, the cost of keeping animals and, very importantly, the cost of education. The lump sum can therefore be calculated for a 1-person household at approx. 750 € euro and increases with each additional family member living in the household.
From claim of a credit is spoken when using a credit line. This is the case, for example, if you "go into the red" on a checking account with the option of an overdraft facility.
Companies also frequently resort to such immediately callable cash loans to finance working capital or advance payments on goods. This occurs, for example, when the customer must pay only after the service has been rendered.
types of credit where the payment is accompanied by the signing of the credit agreement are not usually referred to as drawdowns. This is the case with most loans that are deliberately drawn down. This term is then not necessary, because the payment of the borrowed amount is made directly in the agreed amount.
debt service is the sum of all payments that a debtor must make on a regular basis. This includes all repayments and interest payments. It must provide this benefit for all loans taken out at any one time. The debtor can be a private person or a company.
This amount is important when a credit institution wants to determine whether an applicant is capable of capital service. This is only the case if the expenses for the capital service, interest and repayments, do not exceed the regular income.
If the income is lower than what the debtor has to pay for repayment and interest, his assets shrink and the security for the lender is not guaranteed in the long term.
ability to service the debt is the ability of the debtor to be able to pay all the payments that he must make at regular intervals from the current income.
These include repayment and interest payments for all loans taken out. It does not matter if the debtor is a private person or a company.
Before a credit institution lends money, it makes a forecast. In this case, it is checked whether the debtor will be able to pay the principal in the future without using the collateral that he has provided for the loan. If the borrower is able to pay this amount, it is called the debt service capacity of the borrower.
Small loan is the umbrella term for many types of credit, the amount of which does not exceed a few thousand euros.
This includes consumer loans with short terms, for example, to afford a spontaneous vacation, a washing machine or a new computer. These are then usually repaid in monthly installments, which is why they are also called installment loans.
microloans are also counted as small loans. They are granted in developing countries by specialized banks and non-governmental organizations. they are given to small and micro entrepreneurs to promote economic development. In germany, this form of credit is also used as an economic development measure, mostly in the form of start-up assistance for microenterprises.
The conditions of a loan are the conditions under which it is obtained. The most important are the interest rates (nominal and effective) and the term. These are the two conditions that should be compared first.
However, the conditions can also vary in other respects. Different offers include processing fees in different amounts. Depending on the financial possibilities, one decides for longer or shorter terms with correspondingly higher or lower rates. The time of payment must be chosen in such a way that the money is received in time. Sometimes it is possible to start the repayment of the loan in such a way that you do not have to pay the borrowed money immediately.
According to these aspects, it is possible to compare the conditions of different credit offers.
As consumer credit is called a credit from thousand to some ten thousand euros, with a term between some months and eight years. Since it is repaid in installments, it is also called an installment loan.
In most cases it is not necessary to provide collateral for such a loan in the form of assets. It is enough for the credit institution to have a regular and sufficient income.
An assignment of salary is agreed as collateral, i.e. the bank may seize the salary if the payments are not made.
Often a consumer credit is given for the purchase of a car. in advertising it is then called "car loan". Traditionally, the car was pledged as collateral, but more and more credit institutions are doing away with this today.
As overdraft facility is the term used to describe a loan that is intended to bridge short-term bottlenecks in the account holder’s liquidity. The most popular forms are the overdraft facility for private individuals and the working capital facility for companies.
The overdraft facility differs from other types of credit in that it can be taken out directly via a corresponding account. This account, for example a current account, is simply overdrawn.
Although such a short-term loan carries a very high interest rate, companies often use it to bridge additional seasonal costs or late payments from customers. Private individuals use the dispokredit for example, in order to be able to settle bills before the payment date. It is not intended to be a permanent loan and would be far too expensive for that purpose.
Credit is the provision of money for a certain period of time. In addition to the payment of the loaned money, the lender is usually paid in the form of interest.
As security that a counter-performance will be made, tangible goods can be provided, as is the case with a mortgage, for example. The other possibility is that the borrower gives the credit institution the right to seize the income in the event of insolvency. This is how consumer credit is usually handled.
Loans have a central function between companies. Some companies have to pre-finance running costs if their customers only pay after the service has been rendered. You also need a loan for investment in new production equipment and for the purchase of goods.
credit for freelancers
Credit is for freelancers generally more difficult to obtain and never available on the same terms as for salaried private individuals.
Since self-employed people have no legal protection for their job situation, credit institutions must make absolutely sure that they do not lend money to insolvent applicants.
There are banks that can also offer and grant loans to freelancers. However, they check very carefully how regular and how high the applicant’s income is and how long they have been working in their current freelance activity. This additional expense and a still higher residual risk can be compensated, for example, with higher interest rates.
Loan from private
More and more often one comes across the offer on the internet: credit from private sources. this form of credit is not to be confused with the private credit (the "normal" credit, which a financial institution grants to a private person), but is a completely different kind of loan: the money is lent here by a private person.
Accordingly, the websites that advertise such offers are not the lenders themselves, but merely intermediaries between the private individual wishing to lend money and the applicant.
Credit from private sources is granted to companies as well as to private individuals. The confidence in the creditworthiness of the borrower is left to the individual judgment of the lender.
Loan redemption means that a loan is transferred from one credit institution to another. The new credit institution asks the old one when and at what price the loan can be taken over.
this often happens when you already have a loan with installments. For example: you bought a house years ago and you are still paying it off. Now one buys another car – on credit with another bank. Suddenly you have two loans, i.e. two different installments to pay. A loan replacement avoids high costs due to the duplication of administrative efforts. A bank takes over both loans and combines them. Now you pay again only one installment.
credit security These are called insurance policies, which are designed to ensure that loan installments continue to be paid even if the income ceases to exist. They are also called residual debt insurance, and are often part of term life insurance (if they ensure continued payment in the event of death) or occupational disability insurance (if they ensure payment of installments in the event of occupational or professional disability). This prevents accidents or illnesses from leading to financial ruin – neither your own, nor that of relatives and surviving dependents.
There is also credit protection in case of unemployment. This complete protection of the loan ensures that one does not have to sell the house immediately if one becomes unemployed.
In the case of a credit offer a bank offers to lend money to a customer for a certain period of time. In return, the bank charges interest, demands a certain monthly repayment rate and much more. The customer can then decide whether to accept or reject the credit offer.
However, accepting a credit offer does not mean that you will get the approval for it. The bank first checks the applicant’s documents. For example, the bank checks whether the customer is solvent. The customer can only expect a commitment after a successful check. A credit offer should not be confused with an approved credit. The offer is not binding for the bank.
A written credit application is necessary to get a loan. It must contain information about the amount and term of the requested loan. In addition, the applicant must specify what he wants to use the borrowed money for. In addition, he must name securities that he can present to the bank. This can be, for example, guarantees or proof of income. The credit application also usually includes the customer’s consent to the bank obtaining information about him from schufa.
The credit application is not the credit agreement. The bank first checks the customer’s details, especially creditworthiness. Only then does it draw up a credit agreement.
The credit applicant is a customer of a financial institution applying for a loan. In a written loan application, the borrower indicates how much money he needs. In addition, he writes how long he needs the money and what he wants to use it for. Also, the collateral that the credit applicant can present must be named. It can be guarantees or proof of salary. The application usually includes the customer’s consent for the bank to obtain information about him from schufa.
the credit application is not the credit agreement. A credit agreement is not drawn up until the applicant’s details (especially his financial situation) have been checked.
The credit disbursement takes place after the credit application has been approved. At this point, the bank transfers the borrowed money to the borrower’s account. It usually takes several days from the loan application to the disbursement of the loan amount. This also applies to online loans, although they are referred to as instant loans. Because the "immediately" does not refer to the credit disbursement. It refers to the information whether the online credit is granted or not. However, an online credit approval is not yet final. After provisional approval, borrowers must usually send signed loan applications and documents such as salary statements to the bank. Only then is the loan disbursed to the account.
The credit confirmation follows the credit application, provided that the bank approves the credit for the applicant. However, before the bank sends such a confirmation, it would like to receive various documents from the applicant. They are intended to show that he is able to repay the loan amount as agreed. In the case of an employee, these documents include, for example, salary statements. Guarantees can also be included. The credit confirmation must contain all important information about the credit. This information includes, for example, the amount of the loan and the annual percentage rate of charge, as well as the term of the loan and the agreed terms for repayment. The confirmation thus provides security for both sides of a credit transaction.
A credit guarantee can serve as additional security for the bank in the case of a loan. It is required if the bank is skeptical about the borrower’s ability to repay the loan he or she has requested. If the bank requires a guarantee for a loan, the borrower must name at least one person as his guarantor. If the borrower then owes the bank monthly installments, the guarantor has to step in. The credit guarantee therefore entails the risk for the borrower of payments for a loan amount that he himself has never received from the bank. In this respect, there should be a good relationship of trust between the borrower and his guarantor.
Creditworthiness persons who are considered to have full legal capacity according to the civil code have. As a rule, this legal capacity becomes effective when the person reaches the age of 18. reaches the age of 18. Provided that the person’s legal capacity is not considered limited, for example due to psychological problems, the person is also capable of taking out a loan. He may therefore apply for a loan. However, this does not necessarily mean that he will be granted it by a lender. Because a distinction must be made between creditworthiness and credit standing. the latter is assessed on the basis of a person’s financial strength. Creditworthiness is defined as the ability to repay loans without difficulty on the basis of one’s financial situation. This is why banks check creditworthiness and credit standing.
The lender grants credit to customers and collects interest on it. His opposite is the borrower who receives the money from the lender. It is often banks that take on the role of lender. However, this does not necessarily have to be the case. In so-called credit marketplaces, for example, both the borrowers and the lenders are private individuals. the online marketplace then acts as an intermediary platform and at the same time provides collateral for both sides of the credit transaction. For the lender, it is important to keep the risk of a possible payment default low. That is why he usually requires collateral from the borrower. Some borrowers also take out insurance to protect themselves.
From a credit limit This is the case, for example, with overdraft facilities or credit lines. The credit limit indicates how much money you can draw down without making any further arrangements with the bank. The credit limit is set by the bank. For employees, for example, the limit for an overdraft facility is two to three times their monthly salary. Loans with a credit limit are also called variable loans: the borrower can determine the timing and amount of the loan himself, as long as it does not exceed the limit amount. Often, however, the interest payable on such loans is relatively high, which is why it can make sense to reschedule the debt with a more favorable personal loan.
As credit cost refers to the amounts that the borrower has to pay to the lender in addition to the repayment of the loan amount. The costs are mostly determined by the effective annual interest rate.
Example: you would like to take out a loan of 5,000 euros and repay it within a period of 36 months, including the effective annual interest rate. The effective annual interest rate offered by the bank is 3.80 percent. This is the amount you have to pay to the bank in addition to the 5,000 euros. After 36 months, you have paid a total of 5,293.08 euros to the bank in our example case. In this case, the credit costs amount to 293.08 euros.
The term credit limit refers to the same as the terms credit limit or line of disposal. For example, for the limit up to which an account can be overdrawn. With a possible overdraft facility of 1.000 euro the credit limit is therefore 1.000 euro. As long as the borrower remains below the limit, he or she can determine the amount of the credit and the time at which the credit is taken out. As a rule, it is also up to the customer to decide when to repay the loan amount. However, the borrower usually pays for this freedom with high interest rates. Borrowing therefore costs him a relatively high amount. For this reason, it can often make sense to take out a more favorable loan to pay off an overdraft facility.
A credit line (also: credit limit) is the maximum amount that a bank grants its customer as a loan. For private individuals, it may coincide with the credit limit of an overdraft facility for the account. However, banks can allow their private customers a so-called tolerated overdraft beyond the limit. The overdraft of an account then exceeds the credit line agreement.
An open credit line is the amount that lies between the amount of credit already drawn down and the maximum possible credit amount. Unlike most private individuals, business customers often have to pay so-called commitment interest when they are granted a credit line – even if they do not use up the credit line.
A credit marketplace is a platform on the internet where private lenders and borrowers meet. credit seekers present their project on the platform. They specify how much money they need and what the money is to be used for. Private lenders can then decide to finance this project in part or in full. Like banks in the case of bank loans, private lenders in this type of loan also receive a remuneration for granting the loan. It is determined by the effective annual interest rate. The credit marketplace guarantees the borrower that he has concluded a legally valid credit agreement with the private lender. The private lender receives collateral from the marketplace to protect the money it lends out.
The credit rate is the amount (usually monthly) with which a borrower pays off his loan and the annual percentage rate of charge. The rate depends on other characteristics of the loan such as the term, the loan amount and the effective annual interest rate. The monthly installment for a loan should be selected by the borrower in such a way that he is not financially overburdened by payments. If you are aiming for a low credit rate, it is best to choose a long term for your installment loan. The effective annual interest rate is higher as a result, which makes the loan more expensive overall. However, as the time within which the installment loan must be paid off in full is extended, the installments become lower.
Banks sometimes require a loan collateral in the event that the borrower does not meet his payment obligation. In the case of construction financing, such collateral includes, for example, a real estate lien. The bank has the right to foreclose on the property if the borrower does not pay the installments. In addition to the real estate lien, other forms of credit security exist on the financial market. In the case of special car loans, for example, the borrower usually deposits the vehicle registration document with the bank as collateral for the loan. It can then sell the car in case of non-payment of installments. Another possible form of credit security is a guarantor, who is appointed by the company. These people step in if the borrower cannot pay.
A credit insurance can be an instrument for business owners to secure a possible default by customers. For example, the insurance company steps in if a company delivers products to a customer that the customer does not pay for. Credit insurance can, for example, take over collection and reminder procedures and compensate for damage caused by non-payment. Depending on the insurance company, however, it may become active in advance and check the creditworthiness of potential customers, for example. A special form of this insurance is consumer credit insurance, which is offered specifically for credit institutions. It secures the institution in the event that borrowers stop paying the agreed monthly installments.
The credit agreement creates legal certainty for borrower and lender. It contains all the agreed conditions of a loan. For example, the amount of the loan and the term of the loan are stipulated in the contract. It also contains, for example, provisions on the cost of the loan (annual percentage rate of charge) and the options for terminating the contract. By signing the loan agreement, the borrower usually also accepts the bank’s general terms and conditions (GTC) and agrees to a schufa inquiry. By making the request, the lender increases its protection against defaults by the borrower. The contract is not valid until both sides have signed it, i.e. both the borrower and the lender.
The creditworthiness of private customers and companies plays an important role, especially in times of economic crisis. Creditworthiness, also known as credit standing, can prevent customers from obtaining a loan from the bank.
In order to determine this creditworthiness, banks and other lenders require information from the customer that is intended to provide information about the customer’s reliability and reputation. These are used to secure the repayment of the loan. The usual documents to be submitted for determining creditworthiness are proof of income and information from schufa and banks with which the applicants have an account.
Land register excerpts, inspection of existing employment contracts and the customer’s self-disclosure are also part of the credit check.
The term is an important factor for loans. It is determined before a contract is concluded. The term is the maximum period of time that elapses before the loan is repaid.
In many cases, there is also the option of early repayment of the loan. The time period also influences the repayment rate and the nominal interest rate. The higher the monthly repayments, the shorter the fixed term.
The term and other contractual agreements can also be changed by terminations and special payments. This is usually possible without any problems. Not only can the duration of the loan be reduced, but costs can also be lowered in this way.
In certain commercial transactions, debtors are exempt from the usual obligation to check whether the holder of the document actually has the necessary authorization for the security in question. These documents are considered purely legitimation documents designates.
Particularly in the area of foreign trade, such modalities can be found, thanks to which the debtor can or must provide his service to each owner. Such legitimation papers were created to protect the position of debtors against repeated claims.
In contrast to this format, there are the so-called qualified securities with legitimation. In the case of these certificates, only the holders with an authorization have a claim to performance by the debtor.
The new requirements imposed by the German Money Laundering Act as a means of combating organized crime have led to an increase in the number of legitimation check considerably higher security standards developed in this country by banks and financial service providers as well.
If a customer wants to open an account with a german bank or if there is a request for a loan, bank employees must always establish the identity of potential customers. As part of this legitimation check, both the actual personal data and the address of the customer are requested.
The legitimation itself must be carried out with the help of valid identification documents. This process is possible with a passport or a valid identity card. This personal control procedure is also common for applications made via the Internet.
Often there are co-debtor in the case of loans. This means that the loan was not provided to just one person. In credit law, a distinction is made between principal debtors and co-debtors. This can be observed in particular in the case of joint business commitments. Co-borrowers are even more common, for example, when financing a construction project or taking out a real estate loan.
In these cases, life partners or spouses are often jointly liable for the corresponding loan as co-debtors. Both persons together are technically referred to as joint and several debtors. It makes sense to have a second person as a borrower, for example, if this can improve the credit rating. In this way, several debtors can take out higher sums as a loan.
Loans and credit are increasingly being taken out in the form of installment loans and consumer loans, where borrowers take advantage of favorable offers for long-term repayment. The monthly installment in this context, the monthly payment that the debtor has to make in order to repay the loan.
In principle, this monthly installment should be determined on the basis of the borrower’s individual financial situation. The higher the agreed rate, the faster the loan is paid off.
With many installment loans, users have the option of adjusting the monthly charge over the term, i.e. lowering or raising it. Temporary installment suspensions can also be agreed in order to be able to survive financial bottlenecks unscathed as a credit customer.
Behind the nominal amount In legal terms, this is nothing other than the much more frequently used term "nominal value". For each means of payment or product in the financial sector, such a value must be determinable in order to ensure the ability to act.
In the case of foreign currencies – i.e. the different currencies – the nominal value is in most cases stamped on the currency for ease of handling. The value in individual terms is determined by the national banks, such as the Bundesbank in germany.
Exceptions include special or misprinted coins, where the nominal amount is exceeded by the individual value for collectors. In the stock market sector, the nominal value denotes the current creditor claim against the respective debtor due to deviating conditions through share prices.
net loan amount
The net loan amount is the amount disbursed loan amount designates. The amount that a borrower wants to receive from his bank in the corresponding application never corresponds to the actual costs incurred by the bank customer at the end of the loan term.
By its very nature, it is compared with the gross loan amount, which includes all additional amounts added to the loan amount to be disbursed over the period of time. these ancillary loan costs, which significantly increase the net loan amount on the way to the gross amount, include various factors such as residual debt insurance, possible costs for a loan brokerage and fees for processing procedures at the bank granting the loan.
the BGB, the civil code of the Federal republic of germany, contains the legal specifications for the consumer loan agreement.
nominal interest rate
The nominal interest is just one of many variables that can make it difficult to compare loans. Investors should think about this before entering into a loan agreement.
The nominal interest rate is the amount a borrower must pay per year for a given loan. However, this interest rate only relates to direct borrowing costs. The nominal interest rate does not refer to additional cost items such as brokerage, processing or account management fees. A low nominal interest rate does not automatically mean that the loan is favorable for the customer. Therefore, providers must additionally disclose the annual percentage rate of charge, which includes fees and possible other surcharges.
Identification technologies play a decisive role in one form or another. This applies to the so-called postident procedure or postident procedure, which has gained in importance especially since the realignment of the money laundering law.
This procedure is offered by deutsche post and is used to identify people. The areas of application are manifold. Thus, this model of impersonal verification of legality is particularly common when opening an account, but also in the use of related financial products.
The postident procedure is not used exclusively by banks and credit institutions. This legitimation is also popular as a solution approach in different shipping processes to send contract documents securely between different parties.
The installment loan has become one of the most popular loan models in germany within just a few years. In this particular loan model, debtors benefit from the fact that the monthly charges are fixed at a constant rate in the form of installments to be paid to the debtor.
Borrowers are mostly private customers who choose this route to purchase consumer and other goods. Although the monthly costs for the borrower remain the same with the installment loan, the interest or. However, repayment conditions change in the course of repayment of the loan. the guidelines for this form of credit are regulated for the protection of consumers in the so-called consumer credit law.
Default of installment
Under a default on installments is a term from the world of banking and finance that means nothing more than that the customer in question is in arrears with his payments. The term therefore only indicates that an installment of the loan has not been repaid. Such a delay is noted in the documents and remains noted there until the installment is paid. Although it does not immediately lead to termination of the loan agreement, it does lead to a critical look by the relevant officer and to a downgrading or termination of the loan agreement. Devaluation of the customer resp. The creditworthiness of the customer. Therefore, such a default should be compensated immediately in order to restore the good basis for negotiation.
residual debt insurance
The residual debt insurance secures the borrower in question and or. Or his relatives or friends. surviving dependents against the death, illness or unemployment of the policyholder in question from. Furthermore, the so-called. Residual debt insurance to the lender as security or. Additional security for the repayment of the loan. This type of insurance is therefore always taken out in connection with the loan taken out and is in principle charged to the borrower. Nevertheless, this insurance should not be waived in any case, unless only short-term credits are involved. In the case of long-term loans or. In the case of mortgages, this insurance is in any case an obligatory component that every lender insists on.
In the schufa it concerns the well-known german enterprise of the so-called. Schufa holding AG, which used to operate as a registered association. It sees itself as an institution for general credit protection, although this is rather ambivalent and is also seen in this way in many financial circles. Nevertheless, the company and its services still have a high function, especially in the reporting area. The service is also viewed from a skeptical perspective across borders, especially with regard to data security and data protection, as well as the banking secrets of neighboring countries. This company is probably still the most important in germany.
Criticism of the schufa clause is mainly practiced by lawyers and consumer advocates. These accuse the company of being involved in massive data espionage and disenfranchisement of the citizen through the schufa clause. The so-called. Positive reports and negative reports cannot be verified in their origin either by lawyers or by the banks concerned or by the citizens assessed in each case, and thus have the reputation of being arbitrary assessments. In the financial sector, at least in the foreign financial sector, this clause and the company’s entries are therefore viewed with skepticism rather than benevolence, with the result that the requirements tend to be on the decline.
The schufa report is a report to the schutzgemeinschaft fur allgemeine kreditsicherung (credit protection agency). schufa uses various data to assess customers’ creditworthiness. A schufa report can therefore have negative consequences for the customer, because it could be that he will find it more difficult to obtain credit in the future. Companies in the telecommunications industry often misuse the schufa report as a means of exerting pressure on customers who are in arrears with their payments. However, this is dangerous under criminal law, as you could be doing the customer an injustice. Therefore, it is possible to proceed against it in court. In order to check what information is available at schufa, you can now make a request for your data.
In the field of finance, the concept of so-called "default" is used. self-disclosure a different meaning to. As the name implies, a self-disclosure is a disclosure made by the borrower or investor to the other party to the contract. Basically, information about oneself or one’s own company is passed on by the provider of the information to third parties, who may then use this information for their own purposes – for example, in the context of a loan negotiation. Here, both parties pursue a common goal, which usually consists of a contract that is to be created for specific financing purposes.
At social lending it refers to various internet platforms, the aim of which is to bring together credit seekers and credit bidders. The various forms of social lending thus involve supply and demand within the framework of private providers and buyers of credit, whereby the framework conditions can be freely negotiated. This offers the opportunity to obtain loans in an uncomplicated way and to negotiate the loan agreements freely, independently of the normal bank guidelines. These are financial transactions from private to private that do not require the participation of a bank. A new procedure in germany, these models have been successfully practiced in other countries for decades.
Shall and have
With the terms should and have is usually a term or a concept that is used by the. A group of accounting terms that has a basic application in cashless payment transactions and account management. However, there is also a novel with the title soll und haben, which should not have any meaning here. the terms mainly refer to the two sides of an account, on which the credit on the one hand and the debt on the other hand are recorded. The basic rules of accounting are also defined and explained in relation to these two terms. They are part of the basic knowledge of every bank employee and accountant as well as tax advisor.
unscheduled repayment/special payment
Under a special repayment (special payment) is understood to mean an installment payment or even just the payment of a partial amount of a loan installment that is made on an unscheduled basis – i.e., in addition to the actual payment obligation. Of course, each unscheduled repayment (special payment) reduces the length of the loan term and also the amount of the remaining installments. So whoever has the opportunity to do so should make such payments in his own interest, unless it is excluded as such on the part of the bank. Then, however, a change of the institute would have to be considered, because in itself the prohibition of such a payment represents an anti-competitive act. On a possible. Existing exclusion clauses in the contract must be observed at an early stage.
Under the term repayment is the repayment of a loan in sog. repayment rates. In this case, payment is made every month or quarterly, semi-annually or annually. Annually a part of the debt is paid off in the form of a redemption payment. However, there are also forms of loans in which the debt only has to be repaid in full at the end of the term in a single installment. The way in which repayment is made varies from one type of loan to another. This arrangement is subject to the negotiations and commercial freedom of the contracting parties concerned, so that there is no generally valid legal basis for this. The only important thing is that the installments are paid on time.
The repayment share is the portion of the loan that remains after deduction of the interest portion. The repayment portion is a term from the financial sector that is used primarily in the context of loan negotiations with banks, savings banks, building societies and other creditors. But also authorities like to use this term in the context of a rent debt. This portion is that which serves to repay the loan and is usually spread over the entire term of the loan. However, there are also various models of financing in which this share must be repaid in a single sum. However, this occurs primarily with foreign currency loans.
The repayment schedule serves to itemize the monthly costs from a loan. Primarily, such a plan is used in the area of real estate loans and similar financing models.
The planned repayment items are fixed on it, which are to be paid until the end of the respective term or. Until the final repayment of the loan debt, the following payments are to be made. Even though the amortization schedule is an important tool for consumers, statements of this kind are legally obligatory, especially for the banks.
savings banks and building societies, as well as all other providers of real estate financing, must draw up a repayment schedule for their customers to see. As fixed points, the plan must contain at least the amount of the loan as well as the nominal and effective annual interest rate and the agreed repayment installments, in addition to the respective loan form.
The repayment settlement In the case of a loan, this is a fixed amount that must be agreed between the borrower and the credit provider as part of a credit agreement.
This special agreement refers to the moment during the credit period when the residual debt and the outstanding repayments are to be settled. experts distinguish between a variant known as immediate repayment settlement, in which the borrower’s incoming payments are often calculated to the day.
Alternatively, there are modalities where these settlement dates are arranged at monthly, quarterly or even annual intervals over the entire loan term. The settlement has an impact on the effective annual interest rate.
At the so called overdraft the variants differ. This depends on whether the bank customer is a private or a commercial user.
While the loan model for private customers is known as an overdraft facility, which is a fixed amount on current accounts, this form of loan is known as an overdraft facility for business customers. In both cases, this is a form of loan originally intended to bridge liquidity problems.
For private customers, the colloquially known dispokredit was offered for the first time at the end of the 1960s at a bank as an extra with a current account. Unlike other loans, the credit line can be used at any time. Repayment is not tied to redemption periods.
A rescheduling is especially popular when interest rates are favorable again. The banking sector is also heavily promoting debt rescheduling in these times.
Debt restructuring means that you pay off a loan by taking out a new one. the interest rate of the new loan is lower than the old interest rate. however, the reason for a rescheduling does not have to be the better interest rate.
It can also be a matter of improving or restoring one’s creditworthiness, that is, personal creditworthiness. Instead of a few installments with high payments, one could, for example, agree on many installments with low payments. This is how you get back some financial leeway.
Interest calculation during the year
For simplicity’s sake alone, accrued interest on a loan is sometimes settled at annual intervals for most forms of loan.
For periods of less than twelve months, the printout is interest calculation during the year common. These intervals are much shorter in many cases. With formats such as the dispokredit, for example, repayments are made at quarterly intervals. In other areas, the billing is even done on a monthly basis.
The main advantage of calculating the interest rate during the year for the borrower is that the full amount of the interest burden is not demanded at the end of the year. If the term of the loan is only a few months, the interest rate may be calculated exactly in the opposite direction.
variable interest rate
The majority of credit models offered on the financial market involve fixed-interest offers. However, there are certainly other approaches in which a Variable interest rate is charged.
In these cases, the lenders, i.e. banks and other credit institutions, flexibly adjust the applicable interest rate to changes in the sector. Possible moments in which a variable interest rate makes significant jumps in one direction or the other are, for example, corrections in the prime rate by the european central Bank, as has happened repeatedly in recent months.
Especially in the case of overdrafts for business customers, such adjustments are common practice at many banks, even at short notice.
consumer credit law
The consumer credit act As a fixed component of the civil code, it serves to strengthen and secure the legal position of the consumer as a private customer vis-à-vis the commercial providers of the various credit models.
Since the beginning of the 1990s, loan agreements have been legally regulated in this form by the state; they were not incorporated into the German Civil Code until 2002. The framework requirements set out in the Consumer Credit Act include the possible modalities for repaying a loan, the so-called effective interest rate – in short, basically all the essential criteria that must not be missing from any loan agreement.
This also includes the right of revocation for loans and insurance policies. This law also stipulates that contracts must be recorded in writing.
The credit model people’s credit was a special financial product of the BILD newspaper.
This is an installment loan, which is granted as usual on the basis of the so-called creditworthiness. In 2006, BILD was primarily responsible for advertising the protected volks-Kredit model. Consumers could submit applications for a consumer credit to various providers.
Thus, the option of requiring sums of at least one thousand and at most 75.000 euro to apply for.
Clauses on so-called prepayment penalties can be found in the clauses of many loan agreements. Consumers with a current loan are not necessarily well advised to invest available capital directly in the repayment of the loan in question.
These early repayment penalties are used by banks and other lenders as a compensatory payment to protect against possible losses in interest income due to early repayment of a credit line. the early repayment penalty is a service with a one-time calculation.
This compensation is necessary because the providers themselves have to refinance loans, but cannot terminate them to the same extent before the expiry of deadlines. The required amounts of these special items in loans are levied on the basis of the calculated interest rate on the loan.
The term solvency has the same meaning as the terms financial freedom of movement or liquidity. In concrete terms, this means that you can pay your bills on time. The term is applied to different groups:
For a household, an individual consumer or a business, insolvency is an essential aspect. It is also an important calculation parameter for state budgets.
However, insolvency does not always have to do only with money.
In order to remain solvent, one can take out a credit, for example. However, it should be ensured that it can be repaid. Those who are unable to pay must file for insolvency. This applies, for example, to companies or private households.
Payment terms regulate all types of interest and principal payments. the lender and the payee agree in the loan agreement on the way in which the borrowed amount of money must be repaid. In particular, the time of repayment (usually in the middle of the month or at the end of the month) and the form of payment (cash, bank transfer, direct debit, etc.) are determined.) and the period in which the borrower has to complete it. Among other things, the payment modalities also regulate the type of interest and whether or not early terminations or. Annual special payments are permissible. Furthermore, agreements in the event of a possible insolvency (unemployment, private insolvency, etc.) are not taken into account.) made by the borrower.
The payment schedule, also called amortization schedule, informs the payee in detail about the course of interest and redemption payments of his loan.
The borrower is given a detailed list of the outstanding payments, the amount of interest and principal to be paid in each repayment period, and the date on which these payments are to be made (according to the payment terms).
This gives the borrower a precise overview of the remaining debt to be repaid. The payment plan must be available to the borrower in written form and should already be drawn up during the initial consultation so that any financial burden and the complete procedure are clear to the borrower. In case of additional special repayments, the payment schedule must be adjusted.
The interest portion varies depending on the outstanding repayment amount. In the case of loans, the interest is calculated on the outstanding amount of the loan. Initially, the interest rate is therefore high and then falls permanently because the remaining debt is reduced by portions that have already been repaid.
The exact amount of interest is calculated from the respective loan amount and the nominal interest rate fixed at the beginning. The repayment installments increase to the same extent as the interest payments decrease in the repayment period, since both together always result in the agreed repayment amount according to the payment terms. Agreed special repayments accelerate the reduction in the interest burden and the increase in the repayment portions.
this scheme of repayment, amortization and interest is called the annuity principle.
Interest are charged as a countervalue for granting a loan, which the borrower must repay in addition to the services received. The amount of these charges is usually calculated on the basis of the term of the loan, the general situation on the money market and the borrower’s ability to repay the loan.
A distinction is made between the nominal interest rate and the effective interest rate. The nominal interest rate is the stated interest rate for the loan.
However, the cost of the loan is not only determined by the nominal interest rate, but may also include other fees (processing fees, valuation, etc.).) and disagio (deduction from the initial value of the loan) can be increased. The effective interest rate is calculated from the nominal interest rate and the additional borrowing costs. For the borrower the effective interest rate is decisive.
Fixed interest rate
In the case of a fixed interest rate an interest rate is fixed for the entire term of the loan. It is fixed at the outset and does not change during the term of the loan. In contrast, there are variable interest rates. Here, the lender can raise and lower the interest rate without first talking to the borrower.
Therefore, the borrower has advantages in the case of a fixed interest rate. The borrower does not have to expect unexpected increases in interest rates, which would mean a significant additional burden for him/her. In normal cases, however, neither the borrower nor the lender can terminate the agreement prematurely.
In periods of low interest rates, borrowers should therefore secure the low interest rate for as long as possible by fixing the interest rate at.