General information about taking out a loan

Loans can generally be divided into two different categories. On the one hand there is the bank loan and on the other hand the private loan. As the name suggests, a bank loan is granted by banks and credit institutions and a private loan is granted by private individuals.

Bank loans are granted to private individuals, companies and the self-employed. The principle always involves a lender and a borrower. The lender, i.e. the bank or the lending company, makes the borrower an offer for an amount that it makes available to them.

The borrower, in turn, must repay this amount to the lender within a certain term, usually between 12 and 84 months. In doing so, they not only repay the actual loan amount, but also interest and a processing fee.

Legal basis for loan contracts

A loan contract is subject to the general law of obligations under the German Civil Code (BGB) and guarantees the contractual parties the so-called freedom of contract. A loan is therefore a contract under the law of obligations that governs the provision of money and the obligation to repay. A loan agreement is only concluded when an offer from the lender is made and accepted by the borrower.

If the loan agreement has come into effect legally because the agreed prerequisites are met, both lender and borrower must fulfil that contract. This means that the credit institution must pay out the loan amount and the borrower must repay the instalments to the bank on time and in full within the agreed term, including the agreed interest and any loan processing fee.

Conditions for a loan

It is also possible for two or more borrowers to apply for a loan from the bank or credit institution. This has the advantage for the borrowers that banks are usually more inclined to grant a loan in such cases, because there are several people from whom they can recover their money if one of them gets into payment difficulties.

As a prerequisite for granting a loan, credit institutions impose a number of conditions that the borrower must fulfil. On the one hand, a permanent job with a regular income of an appropriate amount is advantageous. There should also be no negative entries in the Schufa and the household calculation performed should show a surplus so that the loan instalments can be covered.

Only when all of these prerequisites are met will the lender release the loan amount.

At MAXDA, however, loans are often also granted in difficult cases. The reason is a large network that also includes Swiss banks. These do not work with the Schufa.

Processing fees for every loan?

Banks, savings banks and credit institutions handle the loan processing fee differently when granting loans. For the administrative effort incurred — meaning the consultation before taking out a loan, the creditworthiness check and the final lending decision — some banks until recently charged a so-called processing fee. This is listed in the loan documents and is added to the monthly instalment payment.

The processing fee is a certain percentage of the loan amount that is either deducted from the loan amount before disbursement or added to it. The processing fee is charged only once or, at some banks, can be divided into a conclusion fee and a fee for the final processing of the contract at the end of the term.

The loan processing fee is included in the monthly calculation of the loan instalments and is therefore also a factor in the calculation of the effective annual interest rate. The amount of this processing fee varies from one credit institution to another and can vary greatly. When taking out a loan, the borrower should therefore still ask about the fees or specifically look for an offer that does not include a processing fee. After the 2014 rulings, however, almost all consumer loans are available without a processing fee.

A first basis for comparison between the different offers is the effective annual rate. When comparing, special conditions and other fees for early repayment of the loan should also be taken into account. Comparison portals usually do not provide a true basis for comparison because they state hypothetical or minimum interest rates. A real comparison can only be made with individually prepared offers. For this reason, MAXDA offers the service of requesting these offers from a large network of banks. Since MAXDA works independently, it can present you with the actually cheapest option from all offers. What is important to you in a loan agreement will of course be clarified in advance.

Legal situation: processing fees for loans

In May and October 2014 the Federal Court of Justice (BGH) classified the processing fee demanded by numerous banks as unlawful. The ruling prohibited future processing fees for consumer loans. In addition, consumers were enabled to reclaim fees for loans they had paid less than 3 years previously. Borrowers of instalment loans for car financing and mortgage financing were particularly affected.

In many cases, the processing fees charged by banks when granting loans were also listed in the respective bank's price-performance directory. The borrower can view this in any case before concluding the loan agreement and thus obtain clarity about the amount of the expected processing fee. Those who already include these costs when taking out their loan can avoid unpleasant surprises in the end.

Judgments of the Federal Court of Justice on unlawful processing fees for loans:

• BGH judgment of 8 November 2016, Az. XI ZR 552/15
• BGH judgment of 9 May 2017, Az. XI ZR 308/15
• BGH judgment of 13 May 2014, Az. XI ZR 170/13
• BGH judgment of 13 May 2014, Az. XI ZR 405/12
• BGH judgment of 4 July 2017, Az. XI ZR 562/15
• BGH judgment of 4 July 2017, Az. XI ZR 233/16

These judgments deal with consumer loans, business loans and home savings contracts and their loan processing fees, processing commissions and conclusion fees demanded by banks and savings banks. However, conclusion fees for home savings contracts and Disagio are permissible. If, as a consumer, you have paid an unlawful loan fee for home savings loans in the last 10 years or for other loans in the last 3 years, you can still claim a refund. Interest may also be claimed as part of this refund.

The reasoning behind the case law is that costs arising from the bank's own interest may not be charged as a processing fee. This includes, for example, the creditworthiness check.

Loan processing fees: transparency is important

Even if all points and costs are discussed openly in a consultation with the staff of the respective credit institution, surprises for the borrower after the conclusion of the contract can be avoided. In addition to comparing interest conditions, the amount of instalments and the different loan amounts, borrowers can also address the processing fee when comparing different providers to reach a final decision.

Until recently, some lenders could also charge processing fees for the final handling of the loan agreement when the loan agreement ended. The borrower can also inform themselves about these costs in advance so that the costs they will face are clarified at the time of signing the contract. There are therefore a number of points to consider when a borrower takes out a loan.

Good preparation for loans with processing fees

To avoid losing track of the various fees and costs, good preparation is advantageous. A lot of information on the subject of taking out a loan or processing fees for a loan can also be found on the internet. However, if the information overwhelms you because of its abundance, you should go to a detailed consultation with an employee of the credit institution with your questions and concerns.

It can be useful to write down the appropriate questions in advance so that nothing is forgotten during the meeting and information about the processing fee is not overlooked. Well prepared for taking out a loan, nothing can go wrong for private individuals, the self-employed and freelancers who would like to cover a certain financial need through a credit institution.

After all, especially when expenses arise that cannot be covered from monthly funds at once, going to the bank or the offers from different credit institutions can be very lucrative and helpful.