Loan commission and other hidden costs

Credit commission, provision commission or loan commission - especially the first two terms will be foreign to many consumers.

Lending banks usually do not like talking about it. However, this does not mean that such commissions do not accrue as part of the credit costs.

 When it comes to consumer loans, these additional costs are generally hidden. They are included in net interest or loans for private purposes in the effective annual interest rates.

The same goes for the notorious loan processing fee, which the Federal Court of Justice declared inadmissible in 2014 as a one-off, non-recurring fee.

Banks are trying to compensate for the elimination of this additional income through a correspondingly higher borrowing rate.

Below we explain briefly what the various commissions are. Thus, consumers experience what is in the "pure debit interest" still in the effective annual interest.
Credit Commissioning: What is it?

The loan commission is a technical term from the banking industry. The term describes the price of a loan, which is not lending rates in the strict sense.

The loan commission covers expenses of the bank that arise independently of the use of credit.

These include time-dependent processing fees and, above all, refinancing costs for the provision of the granted loan in its full amount.

The loan commission, as a component of the borrowing rate, becomes part of the effective annual interest rate.

Consumers are therefore almost never confronted with the calculation of separate loan commissions.

The situation is different, however, if the borrower is a business customer. Here it happens that in addition to the actual debit interest still loan commissions are required separately.

This happens above all in the case of framework loans such as discretionary loans or overdraft facilities.

For frame loans, the interest rate applies only to the part of the loan taken.

Banks, however, need to cover the granted credit line with equity, without relying on the use of the credit line by the business customer. Because every line of credit involves a theoretical credit risk.

With the costs of covering the latent credit risk even if the credit line is not used, banks justify the separate collection of credit commissions.

Another reason, from the banks' point of view, is the administrative burden associated with the constant use of installments.

Does this mean that private customers are spared from loan commissions on discretionary loans? No way! The commission will be part of the often perceived as outrageously high interest rates.
Provisioning commission and commitment rate

From the point of view of the borrower, the terms "provision commission" and "provision interest" describe the same facts.

Credit customers must be responsible for the costs incurred by keeping the loan amount after the contractually agreed payment date (the payment maturity).

Commitment commissions are typically charged as a percentage of the loan amount not claimed after the disbursement date.

There are two calculation methods:

In the case of the calculable calculation method, commitment interest is charged only on the unused loan amount.

The non-creditable method, on the other hand, charges provisioning commissions to the total amount, regardless of partial drawdowns.

In private business, provisioning interest mainly plays a role in construction projects or real estate purchases.

As a rule, an interest free period is agreed, which is usually between six months or one year. After this time, provisioning commissions must be provided.

In the interests of the consumers, it is natural, if the non-interest-free time is as long as possible or no provisioning interest is required at all.

Commitment commissions play a role, especially in new buildings, because the loans are usually retrieved after construction progress. If the construction is delayed, the time without reserve interest can be exceeded.

In such cases, it may be necessary to pay deployment commissions, which will then be termed interest.
Loan processing fees

Credit processing fees are neither loan commissions nor provisioning commissions.

Rather, these are one-time, term-independent fees that are not reimbursed if the loan agreement is terminated prematurely.

In former times, processing fees were regularly levied alongside lending rates.

Banks use terms that sometimes obscure the facts. One example was Targobank's "non-maturity individual amount".

However, the judgments do not apply to development loans granted under public law. Also, special fees in the context of the award of KfW loans are not subject to this case law of the Federal Court.

However, termination fees for home savings contracts are permissible. This only applies to the Bauspar contracts themselves.

If a building society lends in the context of a real estate financing loan, however, processing fees and other runtime-independent fees are inadmissible.
Credit commission

Loan brokerage commissions are fees that certain financial service providers obtain for brokering bank loans.

Creditors are not banks but the financial service providers. These can be credit intermediaries or credit comparison portals.

Sometimes the impression arises that only credit intermediaries, but not comparison portals, charge commissions. Finally, comparison portals advertise that their services are free and non-binding for the customer.

However, this impression is deceptive.

P2P portals that provide loans from private investors typically disclose the commissions you collect on their websites. The commissions are part of the annual percentage rate.

Portals that compare and offer bank loans do not usually do so. Portals usually conclude commission agreements not with the credit customers, but with the partner banks.

But the purpose of loan portals is precisely to help loan customers with loans with particularly favorable terms.

From time to time banks offer credit portals such as Finanzcheck particularly favorable interest rates via credit portals . These are mostly time-limited promotions that can benefit selected credit customers.

When making a loan via a credit intermediary, the commission is usually part of the effective interest rate.

Similar to credit comparison portals, the commission for the credit intermediary is often taken over in whole or in part by the partner bank.

However, there are exceptions where a separate credit brokerage agreement is concluded. This occurs, for example, for loans without SCHUFA from abroad.

In these cases, the customer bears the commission alone.

Credit brokerage commissions are permitted. However, they are subject to general legal regulations. For example, the commissions collected may not be immoral or meet the requirements of the usurer.

For example, a placement commission of 6% of the order amount can fulfill the criteria of the usurer.

Commissions for credit intermediaries are one-time fees for the successful brokerage of loans. In addition, customers only have to make compensation for expenses. If no contract is concluded, no commission claim arises.

All other charges are inadmissible. This applies, for example, for contact via so-called telephone value service numbers.