Glossary
Financial terms explained simply
A fixed interest rate of 1% over the entire term of the loan requires a corresponding contractual agreement. In the case of government-subsidized loan programs, the following mechanisms may come into play:
1. Allocation of state grants and subsidies
To promote priority economic sectors, the state may provide earmarked, non-repayable grants. These funds can be used to partially offset the financing costs incurred by a partner bank, thereby enabling the offer of a reduced interest rate, subject to specific eligibility conditions.
2. Strict rationing (program limits)
The financing volume of state funding programs can be limited by set budgets and quotas. The financing is then only available to applicants who meet the respective participation conditions and whose documents have been fully checked, as long as appropriate funds are available.
3. Fixed rate for the entire term of the contract
A fixed interest rate can be set for the entire agreed term of the contract. This protects borrowers against subsequent changes in the general level of interest rates. The specific terms and conditions of the loan agreement are the deciding factor.
A constant installment paid over the entire term of a loan. It consists of an interest component and a principal repayment component, the ratio of which shifts over time.
An individual's creditworthiness. It describes the ability and likelihood of repaying a loan in full and on time.
The total annual cost of a loan, expressed as a percentage and including interest as well as mandatory additional charges. It allows for the comparison of different loan offers.
International Bank Account Number for the unique identification of an account within European payment transactions.
The period over which a loan is repaid—from the time of disbursement to the final installment.
The portion of the loan amount that has not yet been repaid at a given point in time.
A credit bureau that collects data on consumers' creditworthiness. Lenders use the SCHUFA score for risk assessment.
The pure interest rate applied to the loan amount, excluding any additional costs. It can be set as either fixed or variable.
An additional, unscheduled repayment—beyond the agreed-upon installment—that reduces the outstanding debt and, consequently, the interest costs.
The scheduled repayment of the loan amount. The higher the repayment installment, the faster the loan is paid off.
The reason for which a loan is taken out. In the case of an installment loan, this can often be chosen freely.