Every consumer knows about credit, but what is the difference between a dispo and a credit line? Why is an Loananche loan, even if no money flows? Who can lend? We want to answer these questions in this article and bring structure into the lending business. But first of all we answer the question: What is a loan anyway?

What is a loan?

What is a loan?

A loan is the transfer of money by the lender to the borrower. Under the loan agreement, the lender is even obliged to disburse the loan (1).

Typically, the borrower pays the lender an interest rate for the duration of the loan. Depending on the type of loan, the interest rate is fixed for the entire term (fixed borrowing rate), but can also fluctuate (variable interest rate).

The borrower undertakes, in accordance with the loan agreement, to repay the loan annuity, ie to repay every month plus interest or repay the loan at the end of the loan term (term loan). During the term, he only pays interest on a term loan to the lender.

The credit agreement also regulates whether collateral is provided and, if so, what is assigned as collateral.

The most important species

The most important species

The disposition credit

Popularly known as Dispo, this loan option enjoys wide popularity among bank customers. There is no classic credit agreement for the disposition or current account credit. The bank grants the customer an overdraft facility. This means that the customer can also make dispositions of his account, if there is no more credit.

The amount of the dispos is based on the amount of the monthly cash receipts and the creditworthiness of the customer. A position of collateral is usually not. If there are indications that the creditworthiness of the customer is deteriorating, the bank may terminate the repayment credit with a “reasonable period”, usually four weeks. An unauthorized account overdraft can make the bank with a period of ten working days due, which is to ask the customer to compensate.

The advantage of a disposition credit lies in the uncomplicated implementation. The customer pays the interest only on the amount claimed. A loan repayment is not agreed. Disadvantages are the above-average interest rates, which are variable. Against this backdrop, consumers should use the PRM only for the short-term bridging of liquidity bottlenecks, not for long-term financing.

The framework credit

The framework loan represents a middle ground between a classic installment loan and a repayment credit.
The customer receives a credit line on a subaccount. If he needs liquidity, he can access the sub-account. Interest only accrues on the loan actually used.

In contrast to a Dispo the framework loan provides however a monthly return of the taken up loan before. This can either be a certain percentage of the loan or a fixed amount agreed in the loan agreement. An underwriting loan may be accompanied by the provision of collateral. In most cases, this is a salary assignment. A fixed repayment term is not planned.

The interest rate is variable, ranging between the interest on a credit line and the interest on a classic installment loan.

The installment loan

The installment loan or even the consumer loan is regarded as a classic consumer finance loan. He is available as a loan at leisure, but is also earmarked, for example, for a vehicle financing, sufficient.

A classic installment loan is characterized by the following points:

  • Fixed debit interest rate over the entire term
  • Duration between 12 and 120 months (depending on the lender)
  • Loan amount usually from 2,000 euros or 3,000 euros
  • Maximum loan amount between 50,000 and 100,000 euros (depending on the lender).
  • With a bank loan collateralization by the salary assignment.

Installment loans are no longer given directly by banks today. Dealer financing in retail has become more and more popular. Of course, in this case, a bank as a backer in the background. Loans from private to private, in which several private investors finance the loan project of a private individual, also count as installment loans.

The interest rate on an installment loan is well below that of an outright loan, but in most cases depends on the creditworthiness of the borrower.

For a installment loan, the written form is mandatory. Pursuant to Section 355 BGB, the borrower has a right of withdrawal within 14 days of the conclusion of the contract (2).

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Important information

The standard form of installment credit is personal credit, which is generally aimed at consumers. For special purposes and target groups, there are installment loans, for example, as a car loan, civil service loan or self-employed loans.

Small loans

Small-loans are a special variant of loans offered by FinTechs. Small loans are issued only in the amount of 500 euros or 600 euros. Due to the low amount, the repayment is made after four weeks in one tranche or in two installments. The interest rates correspond to those of a disposable, but act in absolute terms because of the short term extremely cheap.

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Real estate loans

Real loans, better known as mortgages or mortgage loans, are used to finance real estate, renovations and refurbishments. Real loans are secured by the registration of a land charge in the land register in favor of the financing bank. If the financing consists of a loan from a mortgage lender and a loan from a universal bank or savings bank, the mortgage lender must always be in the first place of the creditor in the land register.

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German law states that loans may only be issued to persons of legal age. In addition, in almost all cases, a residence in Germany as well as a bank account with a local institute are a prerequisite. Lending is fundamentally not possible with hard negative Credit bureau characteristics. Hard features include, for example, bankruptcy or arrest warrants.

The conditions for a loan are distinguished between the creditworthiness with the conditions already mentioned and the creditworthiness, ie the examination of whether the bank can lend a loan to the applicant.

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