With the Signature under the Loan Agreement, the Borrower Confirms the Loan

With the Signature under the Loan Agreement, the Borrower Confirms the Loan

A loan – whether it is a mini-loan or a real estate loan, for example – is a practical matter and, in most cases, easy to obtain and repay. However, every consumer who takes out a loan should know that it enters into a binding contract with the borrowing, which inevitably results in various rights and obligations that apply to the borrower, or which he must meet. Before a loan is taken, an overview of these rights and obligations should be obtained.

 

Borrowing and the rights of borrowers

 

 Borrowing and the rights of borrowers

When a loan is taken out, the lending bank has to comply with certain obligations, from which the rights as a borrower are derived. These are >>

    • Timely disbursement of the loan amount

      The first and most important right for the borrower is, of course, the right to a timely payment of the loan amount. A credit agreement concluded in writing (only such a contract is deemed to be legally void; electronic or telephone credit agreements are null and void.) Each borrower must also receive a copy or copy of the contract signed by the bank) guarantees the borrower that the loan is the exact one paid sum. The legal claim is valid as soon as the required documents have been signed and submitted by both parties.

       

    • information law

Every borrower has an ongoing right to information. This means that he is always allowed to inquire about his interest and principal payments as well as the outstanding loan amount. In many cases, credit institutions, because they know that borrowers are happy to be informed of their account balance and the outstanding loan amount, will send out a statement of interest paid and repayments at least once a year anyway. Also, the loan status is always apparent from these submissions.

  • cost transparency

    The nature of the loan, the amount of the loan, the duration of the loan, the collateral to be provided and the interest payable are set out in the loan agreement. This also means that the exact costs associated with taking out a loan need to be regulated in the contract and made absolutely transparent to the borrower. Thus, there may be no hidden interest or other additional costs. Also, the processing fee, which was required a few years ago by many banks and which amounted to between 1.0 and 3.5 percent of the loan amount and was required for example for the administrative burden or the credit check, there is no longer. The Federal Court of Justice ruled in 2014 that these additional costs are inadmissible.

    One exception is the so-called residual debt insurance. If, at the request of the borrower, a residual debt insurance is taken out for the loan, the costs for the same will also be incurred. However, conversely, if the bank requires the borrower to conclude an RSV, the costs must be added to the effective interest rate.

  • Issuance of deposited securities after full repayment

    After a full and proper repayment of the secured loan, the lender must return the collateral to the borrower, or he must “transfer” it to him. Among other things, this relates to the return of stored vehicle registration documents or other valuables. The borrower is also entitled in the same way to demand a cancellation of the mortgage granted by the bank in the case of a paid-off mortgage loan. Insurance policies may also be required by the lender after repayment of the loan, if these were part of the contractual arrangements.

  • Withdrawal

    Anyone who receives a loan of any kind as a private person, always has the option of revoking the contract within 14 days. This too is required by law. However, there are also some banks that grant significantly longer withdrawal periods. Also for the so-called zero-percent financing , the right of withdrawal applies. With regard to the right of withdrawal, exceptions may be employer loans, subsidized loans or even loans with extremely small amounts or even short terms – for example, up to three months.
    In principle, it is possible to revoke it by simply sending a simple notification of this request via e-mail. Anyone who has revoked a loan can then return the borrowed money to the lender within 30 days. However, in this respect, too, all banks are differently cultured. Lenders are allowed to charge for the period between receipt and repayment of interest, which are calculated exactly to the day. However, many banks do without those amounts.

As a private individual, any loan agreement can be revoked within 14 days. fotolia.de © Stock Photos-MG (# 134325308)

 

  1. Early loan repayment

    Early repayment is the most common form of early loan repayment. It refers to the right or possibility to liquidate an existing loan in its current form in order to normally use cheaper interest rates for financing. Also, the economic freedom of movement of the borrower can be an influencing factor that influences the decision for an early repayment.

    In general, there are several ways for borrowers to break away from the loan. Possible:

    1. The rescheduling of an existing loan without termination effect
    2. The revocation of the declaration of conclusion of a credit agreement
    3. The termination of an existing credit agreement

    The agreement of debt rescheduling with the bank, in addition to the termination of the second, somewhat unusual, but still legitimate way of replacing an existing loan. In many cases, there is no need for a rescheduling prior notice. Instead, the previous loan will be continued on a new basis. There is then a mutually agreed contract amendment instead of a termination of the contract. The rescheduling may involve the agreement of a cheaper interest rate to the borrower or have the goal to combine several loan liabilities into one loan.

Consequences of early loan repayment

Consequences of early loan repayment

When terminating a standard installment loan, unlike loans secured by mortgages, there is no financial compensation obligation in the form of a prepayment penalty. Nevertheless, the loan terms and conditions of credit institutions occasionally contain clauses which stipulate the payment of a prepayment penalty even in the event of a premature repayment of a simple consumer credit agreement. Since these are also not prohibited by installment loans, banks can use this force of the principle of freedom of contract to their credit agreements.

The obligations of borrowers

 

After it is clear what rights a borrower has or can claim for himself, it goes without saying that the same applies to obligations as part of a loan transaction for the borrower. These are >>

  • Obligation to provide information upon application (credit report), truth obligation

    Anyone who wants to take out a loan must be considered creditworthy by the bank. Credit standing, usually called creditworthiness, thus represents the ability and willingness of a customer to fulfill his future payment obligations in full and on time. As a rule, creditworthiness is the one for which the likelihood is very high that a borrowed loan can also be repaid on schedule. The credit report, which is created as part of a credit check, provides information about the exact creditworthiness of a borrower and thus also about the probability of default risk.

    Borrowers are also required to ensure that all information provided in the context of lending is true. Only then can lenders conduct a necessary and detailed risk assessment. For this in turn, lenders are obliged – because loans may, legally prescribed, only be awarded with sufficient security. Almost any information about the borrower for the lender here is also information about a risk. Be it the wealth and income relationships, personal data on family relationships or even the professional status of a borrower – all of this can be more or less secure or uncertain and involve risks to solvency. With regard to the professional position one thinks about the different protection of different employment relationships, for example against the loss of a professional position.
    If the information provided by the borrower in the credit agreement is not true, this constitutes a significant criminal offense in cases of doubt, such as fraud (credit fraud). This is therefore also punishable by the Penal Code with correspondingly high penalties.

    The agreement of debt rescheduling with the bank, in addition to the termination of the second, somewhat unusual, but still legitimate way of replacing an existing loan. In many cases, there is no need for a rescheduling prior notice. Instead, the previous loan will be continued on a new basis. There is then a mutually agreed contract amendment instead of a termination of the contract. The rescheduling may involve the agreement of a cheaper interest rate to the borrower or have the goal to combine several loan liabilities into one loan.

By signing the loan agreement, the borrower confirms that he has met all the information in a truthful manner and repays the loan amount on the agreed date. Istock © stadtratte (# 625505870)

 

  • Timely repayment of the agreed installments

    The main obligation of each debtor is, of course, the repayment (repayment) of the loan amount paid out, or the agreed installments and the payment of the specified loan interest in compliance with the contractually fixed payment dates. The borrower also undertakes to provide, to some extent, no financial problems that could result in the loan being unable to be repaid. If the borrower does not repay the loan amount as agreed, the lender has the right to charge the borrower with a stand-by interest. From what date and in which amount the commitment interest has to be paid must be agreed in the credit agreement.

  • duty to inform

    In addition to the obligation to provide information, which applies to the borrower in the application process, there is still the so-called information obligation. This is the obligation of the borrower to inform the lender at all times during the term of the loan, if there are serious changes in personal data and circumstances. This can be a change of address, but above all a serious change in financial circumstances. These include, for example, the loss of a job or even a divorce. In such cases, the bank is generally keen to find a short-term solution with the borrowers.

Roger Sutton

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