Lending can be costly. The permissible costs include the processing costs of the lender as well as an agency fee from the lender. Despite the legal admissibility, the latter is rarely to be paid by the borrower, since the credit intermediary usually receives a commission from the bank. All costs charged by the lender must be included in the effective annual interest rate.
What are preliminary costs?
In common parlance, the preliminary costs of a loan are only the fees that also apply if the loan contract is rejected. However, the calculation of fees for a loan application that does not lead to the payment of the requested loan amount is not permitted under German law, so that virtually any loan can be described as a loan without any upfront costs.
If the corresponding term is used for advertising purposes, it actually says only a matter of course. It is to be distinguished from a loan without costs, which actually states that with the exception of the loan interest, no further fees are incurred for the borrowing and thus the nominal interest rate is identical to the effective annual interest rate.
Corresponding loans are only offered by a few banks, with the processing costs that are usually particularly depicted being regularly incorporated into the interest rate. The special application of loans as loans with no upfront costs often leads to consumers perceiving the corresponding offers as inexpensive and foregoing an interest comparison.
Beware of prepaid loans
While loans with no upfront costs are normal and compatible with German law, loans with a calculation of upfront costs to be paid even if the loan application is rejected are an exception and also a violation of the law. Exceptions may apply if the bank acts according to foreign law and this Facts for the customer can be recognized immediately from the address of the bank in another country.
In principle, however, borrowers should refrain from submitting a loan application if the lender does not grant their loans without upfront costs. In many cases, submitting a loan application with an agreed calculation of processing costs, even in the event that the loan application is not approved, means that the supposed lender will charge the applicant the corresponding costs, but the hoped-for loan will not be granted.
Instead of the hoped-for loan, the loan applicant receives a form rejecting his loan application. It is difficult to prove that the bank or the supposed credit broker regularly refuses loans anyway and only wants to collect the processing fees. Not least for this reason, the legislature has decided that loan applications should always be processed without the calculation of preliminary costs and processing fees are only permitted if the loan is actually granted.