If a specified amount of money (money loan §§ 488-498 BGB) or another justifiable valuable item (property loan §§ 607-609 BGB) is made available by a lender or lender for a contractually agreed time, we speak of a loan. In principle, the loan is a debt-free contract and obliges both parties to the debt. According to the Civil Code, the borrower undertakes to return or repay the valuables or the amount of money in the same quality, type and quantity in accordance with the contract. The lender leaves the loan value to the borrower, making the owner the owner. The lender maintains the loan account. At the due date, the borrower will reimburse the lender the loan amount.
Since January 1, 2002, the legislature has distinguished the property loan (§§ 607ff. BGB) and the money loan (§§ 488ff. BGB) from each other in the Civil Code and added the right of the consumer loan contract (§§ 491ff. BGB) if the borrower is a consumer and the lender (creditor) is an entrepreneur. As a rule, the borrower (debtor) submits an application for a loan contract to a bank.
The prerequisite for the award of a loan contract is creditworthiness and agreement on the amount of the money or the justifiable thing. After the lender has checked the creditworthiness, all the loan terms are in the contract. As a rule, the debtor pays interest to the creditor on the loan. If the loan is not granted without interest, the amount of interest depends on the agreements made. If there are no agreements on the amount of interest, the statutory interest rate (§ 246 BGB) will apply. Depending on the term, the interest rate is payable either after one year or upon reimbursement.
In addition to the interest payments, it is customary for banks to request additional one-off fees for a processing fee, a commitment fee or residual debt insurance. If the borrower signs the contract, he undertakes to accept the entire nominal loan amount and to pay the loan interest. With the loan installments, the debtor repays the amount of money made available to him and covers the interest, and possibly also the compound interest. The loan rates depend on two factors (repayment and interest payments). The type of loan determines the amount of the respective shares.
Depending on the repayment modalities and purpose, loans are divided into different basic forms. For example, a maturity loan – also called a maturity loan or an amortization-free loan – is created in such a way that the borrower has the agreed loan amount available over the entire term. In principle, the repayment takes place only at the end of the term, with the interest due being paid monthly. A maturity loan represents a higher risk for credit institutions than other forms of loan. For this reason, credit institutions charge an interest premium on the loan. This results in a suspension of repayment against building society contracts, securities or life insurance.
Furthermore, there are a variety of loan types such as the forward loan (gives the borrower the opportunity to secure a low interest rate for the future), full repayment loans (depending on the interest rate, loans can be repaid faster) and loan forms that are combined with each other.
The loan contract can be terminated both extraordinarily and extraordinarily by the borrower as well as by the lender or ends with the expiry.
For loans granted indefinitely, the creditor is entitled to an ordinary right of termination of three months in accordance with section 488 (3) sentence 1 BGB. If a specific term has been recorded in the loan contract, the repayment is due after the time has expired. Unless otherwise agreed in the contract between the parties, there is no legal right to terminate loans granted for a limited period by law.
According to Section 490 (1) of the German Civil Code, loan agreements with an agreed interest rate and a specific term can be terminated by the lender if the financial situation of the debtor changes and the reimbursement is jeopardized or there is a significant deterioration in the value retention of the security provided for the loan,
Borrowers have the option to terminate the loan with mortgage security and a fixed interest rate if their interests so require. However, such termination is only possible six months after receipt of the loan in full with a period of three months. The creditor incurs damage from premature termination, which the debtor must compensate as prepayment penalty.
Certain framework conditions are the prerequisite for granting a loan. The framework conditions are called conditions. In addition to the effective interest rate and the nominal interest rate, this also includes account management and processing fees, repayment rate and the term. The loan terms are calculated differently depending on the bank.
Banks usually incur administrative fees. These are given in percent, depend on the loan amount and can vary among banks. The fees range from one to three percent. Another cost factor is the residual debt insurance that banks sell for security related to the loan. This is not mandatory as the loan will be significantly more expensive. Each borrower decides independently whether to take out such insurance.
The focus of the loan is on the effective and nominal interest rates. The main cost of a loan is the effective interest rate. Banks are legally obliged to state the effective interest rate in accordance with the price information regulation. The effective interest rate is made up of several items such as transaction fees and account management fees. It is determined by the payment rate, the fixed interest rate, the repayment (start, amount) and the nominal interest. The total costs are shown in percent each year.
In contrast, the nominal interest rate describes the pure loan interest rate. The nominal interest does not include the costs for account management, processing and the modalities for payment. The nominal interest does not say anything about the real costs of a loan and therefore only plays a subordinate role.