Granting loans is as old as human history. Exchanges were also carried out “on the spot”, because not everyone was able to accumulate enough goods to get over the winter or to survive famines. So there have always been people who benefited from having more than others. Since when these businesses are now called loans or loans is not known. But the principle has existed until today.
All facts about the guidebook “Credit or Loan” at a glance:
- Loans can be divided into short-, medium- and long-term loans.
- Loans are long-term loans with usually high loan amounts.
- Both are a money transaction between borrowers and lenders, which is governed by a loan agreement.
- They are governed in part by the Civil Code.
But what possibilities are behind the offers of loans and loans? Our guidebook on the subject of credit or loan reveals it!
1. The definition of credit
The definition for a loan according to the business glossary of the dtv publisher is:
“Transfer of a sum of money to a borrower under agreement of repayment of an equal amount plus interest.”
A loan can be in the form of money or things. This only means that one person – creditor – leaves something to another person – debtor – over a certain period of time. In return, the creditor receives as an acknowledgment in addition to the surrender an additional benefit. This service can already be handed over to the creditor during the transfer.
The functioning of a loan
In times of bartering, when it was still the daily chicken egg to leave a warm coat on cold nights, today one pays interest. Interest is the price you have to pay to borrow money or things. How much this price depends on the loan provider. However, since the financial market is relatively transparent in terms of credit terms, the lender must adapt to market conditions. The demand determines the offer!
However, the borrower must also have certain requirements for a loan to be granted. This includes a regular income with which he can afford the loan and the interest payments. A family without chickens would not have borrowed the coat in the example above. From a certain amount of credit, the borrower should also bring collateral in case of defaults. If the avian influenza plague the chicken stock of the family, at least one dairy cow should be in the stable to give the believer daily a cup of fresh milk. Also, the previous payment behavior at the Schufa is inquired. This is comparable to the earlier village gossip. A village never forgets and the Schufa also does not.
How the repayment is done is often dependent on the duration of the loan. You can distinguish loans in the short, medium and long term. While short-term and medium-term contracts favor installment payments or final interest payments, long-term loans offer many options. Here is for the lenders to get the most money and save the most money for the borrowers. A long-term loan is also called a loan.
The connection between credit and loan
A loan agreement exists between a borrower and a lender. It specifies the amount of repayment of the loan. A loan can be a thing or a money.
2. The definition of loans
The loan can therefore be considered as a form of credit. The word loan always appears in common usage when it comes to larger purchases. As if to give more meaning to the fact. The legislature makes no precise delimitations, but the loan is regulated in the Civil Code ( BGB ).
The definition for a loan according to the Dtv publishing house’s business lexicon is:
“Interest-bearing or interest-free loan with contractually agreed repayment terms. The loan can also be granted in the form of things. Legal basis for a loan agreement are the provisions in the BGB (§§ 488 to 498) “
Before the inclined reader gets the big eyes at the words “interest-free loan”, it must be said at this point that these are only loans from specialist suppliers. Car dealers and electricians use this method to boost their sales. An interest-free real estate loan is currently not in the range of the possible. Perhaps some prefab manufacturers will look to this principle, but due to the long loan terms this is a risky undertaking. And as I said: Currently not available.
A property loan can only be made in exchange for a thing of equal value. To stay in the above example: For the warming coat, a cauldron must be left as a pledge. If the coat is exchanged for a cow, the creditor keeps the cauldron. He can not ask for the cow. The property loan passes with the transfer into the existence of the debtor, which is why he is entitled to sell.
Dedicated to the interest-bearing money loan, so you come across the various ways to repay the loan. In this case, the legislator leaves creditors and debtors completely free in structuring the repayment modalities. Only the Wuchergesetz § 138 BGB should be considered mandatory. Here, the Übervorteilung of the debtor should be prevented. To give a brief insight into the design options, four repayment options are presented below:
The repayment loan has the nice effect of decreasing rates as time goes on. This is due to the fact that the repayment installments remain the same, however, the interest payments relate to the remaining loan amount. Accordingly, with the falling residual debt, the amounts of interest decrease and the rates become smaller. In this version, lenders are rarely willing to make special repayments. After all, they would miss out with higher repayments already calculated interest payments.
An annuity loan, on the other hand, has the advantage that the installments remain the same over time. Although the interest payments also relate to the remaining debt, with continuous repayment, the interest amounts are smaller, but the repayment installments rise. As a result, the borrower can theoretically adjust to fixed installments until the end of the repayment term. In practice, however, there may also be interest rate adjustments over time. Then the annuities would be recalculated.
The term loan is usually combined with a savings system. As the name suggests, the loan amount is paid off at the end of the term at once. This has the advantage that with the saved money also credit interest incurred, which can contribute at least toward the end ordinary interest income. Many lenders offer the savings or financial investment in this loan form. If more lucrative and secure alternatives are available, it depends on the negotiating skills to what extent the credit provider gets involved.
The term loan is similar to the annuity loan. Here, however, all accruing interest will be charged right at the beginning and added to the loan amount. From this sum, the monthly installment is calculated. An adjustment of the interest rate is not provided here.
3. The name makes no difference
Loans or loans are commonly used synonymously and legally it makes no difference whether the loan agreement or loan agreement is above. It is important that fundamental things are considered and the debtor is not over-advantaged by the creditor. Conversely, the creditor can protect himself from the debtor by collateral.
Which repayment modalities need to be grasped must be clarified between the borrower and the lender. Here the contractual partners are given a lot of room for maneuver.