Loan conditions are also known as loan or loan terms. They play a significant role in banking and are the elements of the contract that banks are willing to lend to borrowers.
What are loan terms?
- What are loan terms?
- Which types are there?
- Framework conditions and rights in the context of consumer credit
- What are the differences in loan conditions in the German and international area?
Such terms are not legal terms. Rather, they are different components of a loan or loan agreement . Specifically, the conditions that govern the granting of a loan are regulated. A distinction is made between the loan terms and the terms and conditions. The terms and conditions define the legal relationship between the two parties.
Which types are there?
The general terms of credit are pre-formulated contract terms . These apply to any customer of the credit institutions in the loan processing. By signing the loan contract, the customer accepts the general terms of the loan. These are similar to the terms and conditions. The general credit conditions are governed by the Law on the Modernization of Laws of Obligations .
Separately, there are special rules between the borrower and the lender . This must be done in written and signed form . As soon as the borrower does not sign these terms and conditions, the conclusion of a loan agreement is omitted.
The terms of the loan must include the following information:
- Termination right of the bank and termination right of the borrower
- prepayment penalty
- Compensation for non-acceptance
- Consequences of late payment
- Bank information
- payment conditions
- Conditions as well as costs for the loan
- Repayment obligations and obligations of the borrower and the lender
The general terms and conditions of credit institutions are to be understood as the basis on which the credit institution forms a business relationship with its customers. These are also known as a general banking agreement. In principle, each credit institution is authorized to formulate its own terms and conditions. However, the individual banking groups have GTC proposals to which the banks generally comply . Here, for example, the resolution of the business relationship is regulated. Each bank has its own rules. The terms and conditions are therefore different from bank to bank.
Credit terms are also known as loan terms. This sets each bank individually. However, it is worthwhile to compare the credit conditions of the individual banks in advance. Attention should be paid to the interest rate and the early repayment penalty . This accrues as soon as the loan is repaid earlier than planned. As a private individual, it is still possible to cancel the contract within 14 days.
Framework conditions and rights in the context of consumer credit
Basically, the general provisions on the loan agreement according to §§ 488 to 490 BGB apply. The credit agreement requires a minimum content, a written form and the signature of both parties. According to § 495 BGB, the borrower is entitled to a right of withdrawal . He has within 14 days the opportunity to revoke the contract. However, the borrower also enjoys obligations. So he has to pay default interest, unless he meets a timely payment. Moreover, he has to provide mandatory information in the contract, which allows the bank to better assess the situation.
What are the differences in loan conditions in the German and international area?
When the borrower takes out a loan from a foreign bank, a credit check is made in most cases, but not a check by the Bank, but foreign banks are already charging high processing fees for the loan request. Despite rejection of the loan request, the borrower can incur high costs. In addition, borrowers sometimes receive a loan despite their poor credit rating. However, very high interest rates. This extends the repayment and drives up the costs further. There is an extreme price risk in concluding a foreign currency loan. If the price rises, the loan becomes more expensive and the consumer has to repay much more than initially planned. Furthermore, significant legal differences come into play. The credit service providers are required to comply with the laws of each country . Consequently, the foreign law applies when the contract is concluded. Should it be necessary to hire a lawyer, this will be extremely difficult. Because acting against a foreign bank is costly and tedious. While the terms of the loan are precisely regulated in German law, this is a rather vague area in the international arena, which can often be detrimental to the borrower.
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