Consumer credit

The installment loan is a loan for a certain amount of money ( rates) will be redeemed at a predetermined rate in a pre- specified number of monthly payments in equal monthly amounts. The monthly payments include the repayment of loans, interest and, if necessary, the fees of the credit institution. Installment loans are usually awarded for loan amounts 1000-75000 Euro and can have different runtime.

Term

Installment loans are also referred to as consumer credit or loan purchase. Installment loans are from banks under different promotional names such as car loan or small loan ( installment loan for amounts between about € 500, - and € 50.000, - ) are offered. In Austria, the term switch credit and Abstattungskredit be used.

History

Installment loans are offered in Germany since the 1950s. First, the consumer finance was the main business of the partial payment banks, today it is commonly offered by commercial banks. In particular for the automotive banks, the installment loan is the most important product dar.

For loans to individuals was in Germany until the entry into force of the Law of Obligations Modernization Act of 2002, the Consumer Credit Act.

Source: German Federal Bank, Bankenfachverband

Completion

Installment loans are mostly standardized banking products for private customers. Installment loans are among the most common types of loans, move at a height of around 1000-75000 euros and have a maximum term of 84, sometimes even 120 months.

They are usually as unsecured loans, that is, without the provision of security laid out. Only a wage assignment is typically agreed upon as security in the contract. If the creditworthiness of the borrower is insufficient, a guarantee may be additionally required by the bank. In the financing of motor vehicles, it is customary to make a transfer of ownership of the car. However, some banks do without now - in terms of a standardized and effective editing - even with such financing on transfer of ownership of motor vehicles.

Repayment is usually in equal monthly installments. These monthly rates include the loan repayment, interest and, if necessary, the fees of the credit institution. The interest rate of a loan are higher than mortgages, but often lower than for overdrafts. Typically, one-time processing fee of usually 2 to 3.5 % of the loan amount are required.

The effectiveness of some standard terms to processing fees for private clients is debatable. After processing Gege Bühren were explained by several courts of appeals to be invalid, the Supreme Court should decide in the last instance on the revision of a credit institution against a judgment of the Higher Regional Court Dresden .. The revision, however, was withdrawn because the bank shunned a supreme court decision.

Often, the additional costs will be completed with the installment loan contract payment protection insurance caused.

Mostly the interest rates are set individually today as credit- dependent interest rate. Some banks offer direct loans to cheaper than retail banks. Meanwhile, the lending process is the extent standardized and simplified, so that a comparison of the conditions may be worthwhile to direct bank with many branch banks. The credit agreement using the effective interest rate must be specified to ensure an easier comparison of credit costs of different lenders.

Installment loans are typically reported to the Schufa.

Many dealers, insurance agents and independent brokers offer as credit intermediaries installment loans from banks.

Termination

Termination by the borrower

The borrower may terminate the loan six months after disbursement of termination of 3 months. A prepayment penalty will not apply. However, the Bank is not obliged to repay the processing fee and may charge a reasonable fee for processing the cancellation.

For loans made ​​on or after June 11, 2010, or were, a new EU directive applies: Borrowers will be able to withdraw from the Loan Agreement at any time and without notice. Banks may, however, require a prepayment penalty if the borrower gets out of his contract early. The amount of compensation has been precisely defined by law: for loans with more than 12 months remaining term they must not exceed 1.0 per cent; for loans with less than 12 months remaining term of not more than 0.5 percent of the remaining balance are possible.

Termination by the Bank

The Bank may only terminate when all the following conditions are met:

• The borrower must be at least two consecutive installments wholly or partly in default and
• It must residues rates of at least 10 percent ( in term of the loan rates under three years ) or 5 percent are made ( in term of the loan installments over three years ) of the principal amount of the loan and
• The bank must credit the termination in the third reminder, subject to a two -week period and with reference to the consequences threaten.

Interest

In an installment loan a monthly installment debt include the interest rate for 30 days. Located between the loan disbursement and the date for the first installment more than a month, the accrued interest will be calculated and added to the first installment. This accrued interest is called start-up interest.

Example:

A typical installment loan for consumers with value of € 127.00 and rates over 24 months per 7,00 €. The interest rate is 28.45 %. The rate is divided into principal and interest. The repayment reduces the outstanding balance, so that in the following month less interest is calculated and is more settled. The interest rate and the rate will remain the same over the entire term. Unscheduled There are also no.

It should be noted here that due to the financing of a relatively small amount distributed to many a high rate of interest rates was offset ( 28,45 %), which resulted in a total repayment amount of € 168.00 for a loan value of € 127.00, ie, by funding 32% to be paid more than a direct purchase.

Remortgage

If an installment loan refinanced by a new installment loan, so it is called a revolving credit agreement.

Terms of Use

Installment loans are regulated in Germany in § 488 BGB. Installment loans to individuals are in Germany a consumer loan. The customer hereby inter alia, a right of withdrawal. Within 14 days, he may contradict the credit agreement ( must then repay the loan amount immediately). Furthermore, the form of regulations ( in writing, stating the effective interest rate, and others) are prescribed. Detailed rules on the termination of installment loans are regulated in § 489 BGB, detailed rules to § 495 BGB in contradiction.