Things need to know about loans
From a legal point of view, a loan (often referred to as “credit”) is a contractual obligation that regulates the transfer of money or reasonable things. In most cases, it is a money loan.
- Company loans
- Loan without credit bureau
- loan agreement
- loan interest
- Forward loan
- Mortgage loans
- Real estate loans
- personal loan
- Private loan without credit bureau
- redeemable loan
The lender provides the borrower with a sum of money which the borrower must repay as agreed. The loaned amount (loan amount) falls under the term borrowed capital. Borrowed capital is lent for a certain period of time (loan term).
As a lender, the lender obtains the status of a creditor, who acquires a legally justified right to repayment (see repayment) of the loan amount. As a rule, the contracting parties agree on interest which the borrower has to pay in return for the money lending.
Interest-free loans are rather uncommon and are superficially limited to the family circle. If the lender is a private person, not a bank, they talk about personal loans. The debtor (borrower) can freely dispose of the sum of money as the owner, if it is a loan that lacks purpose.
Loans are based on a contractual agreement between the borrower and the lender. Since verbal agreements carry a great risk and uncertainty potential in itself, the written form is recommended. Consumer loans are required to be completed in writing. The loan agreement defines the individual conditions such as interest rate, term, repayment and termination rights.
Where appropriate, lending is linked to the provision of collateral by the borrower. The loan amount is paid by the lender in a one-off amount or in installments. The repayment can also be made in the form of installments (annuity and repayment loans) or entirely at the end of the term (final loan), depending on the loan type.
The importance of the loan in banking
In banking, loans are medium to long-term forms of debt financing. They are used by both corporations and individuals as a means of raising capital. In both cases, loans serve as a source of finance for purchases for which the borrower’s own financial resources are insufficient.
In the corporate division, this external financing is used to make the necessary investments in fixed or current assets in order to secure the company’s business activities. On the other hand, if loans are concluded by private individuals for consumption purposes with commercial lenders such as banks or savings banks, these are consumer loans.
Loans can be granted for a specific purpose, which is precisely regulated in the contract. For these earmarked loans, the borrower may only use the loan amount paid out as intended. This applies, for example, to business loans and promotional loans for start-up companies and self-employed persons, which may only be used to finance operating resources, equipment or start-up costs.
The home savings loan, which can only be paid out in combination with the previous conclusion of a home savings contract, is also assigned. It is limited to uses in the field of housing such as the construction and purchase of a home, renovation of an existing residential property or rescheduling of a home loan.
After saving the planned minimum balance, the disbursement of the loan amount in the amount of the difference between the fixed home savings amount and the actual savings balance can be agreed. The mortgage loans are used for home loans and real estate loans, which are typically subject to long-term maturities of 15 to 40 years.
Loans can also be used for pre-financing or follow-up financing. With a bank advance loan, the completed home savings contract with the loan amount is financed in between. During the term of the advance loan, the borrower pays interest and savings amounts for the bank contract. The repayment of the loan will be paid upon allocation of the home savings contract with the bank.
The so-called forward loan offers the possibility of fixing the current interest on a loan which will only be needed at a future date. It is often used in anticipation of foreseeable real estate financing in times of low interest rates. Forward loans are offered for a term of up to 60 months.