Borrower’s in terms of a loan
The borrower is a natural or legal person who takes out a loan with a lender. The subject of a loan can be goods (trade credit) as well as money (money credit). In the case of a cash loan, the borrower borrows from the lender a certain sum of money (loan amount), which he must pay back under the contractually stipulated conditions.
From a financial point of view, he uses debt financing. Borrowers may be individuals, the self-employed or companies who meet the requirements of legal creditworthiness and creditworthiness.
As a rule, natural persons gain the ability to legally enter into a loan relationship when they come of age. The creditworthiness, on the other hand, indicates the likelihood that the borrower will be able to meet his payment obligations under the credit agreement. Before concluding the credit agreement, the lender decides whether to classify the prospect as creditworthy.
What results in the rights and obligations of the borrower?
The credit relationship between the lender and the borrower is governed by the conclusion of the loan agreement, which includes the terms and conditions of the lending and the loan relationship. This loan agreement gives the borrower various rights and obligations.
However, all obligations are not necessarily regulated in the contract itself. Rather, individual points in the terms and conditions (terms and conditions) of the lender may be listed. It is therefore important to read the supplementary terms and conditions before signing the contract. Individual rights of the borrower can be standardized in legal regulations. This applies, for example, to the protection regulations for consumer credit according to §§ 491-498 BGB.
Rights of the borrower
Upon the establishment of the credit relationship and after filing the required documents, the borrower acquires a legal right to the loaner pay the loan amount. The lender must provide him with the agreed loan amount for the agreed duration.
After full and proper repayment of a secured loan, the collateral provided to the borrower must be returned or transferred. This concerns, among other things, the return of deposited valuables and vehicle registration documents. In the same way, the borrower is entitled to demand from the bank a cancellation authorization for the granted mortgage on a paid mortgage loan.
Consumers may revoke credit agreements they have concluded with private companies for private purposes within 14 days of the signing of the contract. About this right of withdrawal, the lender must inform mandatory. In addition, the borrower has an ongoing right to information regarding his interest and principal payments as well as with respect to the loan amount still outstanding. Furthermore, consumers are entitled to prematurely repay the loan. In this case, the bank may charge a prepayment penalty, the amount of which is subject to a legal restriction.
Obligations of the borrower
The main obligations of the borrower (debtor) are the repayment (repayment) of the loan amount paid out and the payment of the fixed loan interest rates in compliance with the contractually fixed payment dates. If the borrower does not accept the loan amount as agreed, the lender may charge him / her a lending installment.
In the run-up to lending, the borrower is required to truthfully inform the lender about their financial wealth and income. Credit institutions demand the signing of the credit bureau clause in this context.
In this way, they obtain the authorization to request credit-worthy data from the prospective buyer at credit bureau and to pass on the data in connection with the concluded loan to this credit reference agency. In addition, the borrower has to inform the lender about any changes or deterioration in his or her financial situation such as job loss or divorce that occur during the repayment term.
If the loan collateral has been agreed, it must provide the collateral provided. For earmarked loans, there is the additional obligation to use the loan amount according to the purpose.