The financial world speaks its own language, which is not self-explanatory for many people. But especially in connection with loans, it is important to know and understand the individual terms. The most important terms related to loans are summarized and explained here.
A – Annuity, compensation credit, anticipatory and outstanding balance
An annuity is a payment in which the loan is repaid in equal installments. It is calculated from the repayment and interest.
The repayment loan is a so-called one-off loan that can only be used once by the debtor and must be repaid after use.
Another form of calculating interest is the anticipatory method. The interest on the remaining debt is calculated in advance of the period.
When we talk about outstanding balances, we are talking about the amount due for payment.
B – Credit rating, guarantee, blank loan, balloon financing and bank guarantee
The creditworthiness describes the creditworthiness of the respective potential borrower. The bank therefore checks whether other payments are already outstanding, whether there is regular income and what the debtor’s payment flows are like.
With a guarantee, the guarantor is equally liable as the debtor if the latter can no longer pay his debt. This means that the creditor can demand payment from the guarantor in the event of non-payment.
A blank loan is a loan that is not based on any measurable collateral.
Balloon financing represents a special form of repayment flows. Initially, low installments are repaid per month and high final installments are repaid at the end of the financing period.
If the bank issues a payment guarantee, we are talking about the bank guarantee. Here the bank steps in for the debtor in the event of default if he or she becomes insolvent. The debtor is now in debt to the bank.
D – Loans, overdrafts and decursive loan interest
The loan corresponds to the credit. There is a contract between the creditor and the debtor in which the creditor lends the debtor money for a certain period of time.
The overdraft facility is a line of credit that comes into play if the account is overdrawn. The amount of the loan is fixed and can be used repeatedly.
With decursive interest calculation, the interest payable on a loan is calculated at the end of the interest period.
E – effective interest rate
The effective interest rate describes the costs to be paid for a loan. The effective annual interest rate is charged as a percentage of the loan.
F – Fixed interest rate and maturity
For financing that has to be repaid over many years, a fixed interest rate can be agreed with the lender. If this is the case, the interest costs will not change over the agreed period.
The due date represents the point in time at which the loan granted must be repaid. If this point in time is exceeded, interest will usually have to be paid.
G – creditor
The creditor is the person who can assert an outstanding claim against the debtor on the basis of a contract.
H – mortgage
The mortgage is a so-called real estate lien, which serves as security for loans. The collateral here is a piece of real estate.
K – Conditions, current account credit and credit optimization
The conditions form the framework for a loan, including the amount of the loan, the term, the interest and payment periods.
The current account credit can be used several times as long as the agreed period and credit limit are adhered to.
With credit optimization, several loans are tied together into a bundle, which reduces the total installment to be paid.
L – Leasing
Leasing is a special form of financing that is similar to a rental agreement. The leased property is given to the lessee for use in return for a monthly installment. It is unclear whether the property will be taken over by the lessee at the end of the leasing period or not.
M – reminder
If no payment deadlines have been agreed between the debtor and creditor or agreed deadlines have been exceeded, immediate payment of the debt can be demanded through reminders.
N – net loan amount and nominal interest rate
The net loan amount is the amount paid to the borrower.
The nominal interest rate refers to the face value of a bond.
R – installment or installment loan
The installment loan represents a form of repayment in which the loan amount is repaid in the same amount over a set period. The rate is based on the loan amount and interest.
S – Debit interest and deferral
The debit interest is the interest payments to be made by the debtor.
During a deferral, the repayment of a loan is postponed. The creditor allows the payment to be made at a later date.
T – redemption
The repayment is the repayment of the net loan in installments without interest.
Z – interest
Loans have their price and it is precisely this that is determined by the level of interest.
Henry Ely / editorial team finanzen.net