Before entering a credit agreement, a lender must determine the consumer’s credit standing. In order to determine credit standing, the lender assesses income and other financial conditions. This means that a lender may request information on a consumer's debts and assets, as well as request that the consumer submit documents including payslips, and pension and tax certificates.
Carefully study the terms and conditions of the credit agreement and retain them for future reference
The terms and conditions of the credit agreement state the type of credit in question, payment obligations and the other obligations of the parties concerned. You may repay the balance in whole or in part before due date even if this was not mentioned in the credit agreement. Carefully examine the credit terms and conditions and retain them to avoid any misunderstandings.
A consumer credit agreement must be made in writing and the borrower must be given a copy of the agreement. The agreement may also be made electronically provided that the borrower can save and print it out in unchanged form.
When taking out a credit always check the details of the lender and the contact information for credit-related matters. For example, in shops selling furniture and home appliances, the credit is often granted by a separate financing company even if the agreement was concluded at the outlet.
The borrower has the right to receive an amortisation table
In fixed-term credits paid in instalments, the borrower has the right to receive an amortisation table on request and free of charge. The amortisation table must show the payments to be made, the payment periods and the payment terms. Each instalment must be specified so that the amounts paid as capital amortisation, interest and other fees are given.
If under the credit agreement, the interest rate or other fees may change, the table must also state that the information given will only remain in effect until such changes are made under the credit agreement.
Changes in interest rate
The lender may change the effective interest in accordance with the reference rate specified in the agreement if this is stated in the agreement. The lender must notify the borrower of changes in the interest rate on a permanently storable copy (such as a letter) before the changes take effect or on dates agreed between the parties. The lender must also give the amount of the individual instalments payable after the changes and notify the borrower of any changes in payment dates or the number of instalments.
Penalties resulting from contractual violations on the consumer’s part
If the payment is one month in arrears, and if stated in the agreement, the lender may, on account of a payment delay or other material contractual violation, require that an instalment that is otherwise not due be paid early or that the outstanding balance be paid early. If so agreed, the lender may also take back the item purchased by credit or impose other penalties if the payment is one month in arrears and remains outstanding.
In one-time credits, it is also required that the amount in arrears must
- be at least 10 per cent of the original credit amount;
- be at least five per cent of the original credit amount if more than one instalment is in arrears; or
- cover the entire balance that remains outstanding.
If it is a question of a credit granted for the purchase of a specific item, the percentages referred to above are calculated from the credit price.
Moreover, if the payment is at least six months in arrears and substantial parts of it remain outstanding, the lender has the right to impose an agreed penalty. However, in accordance with good lending practices, the lender must strive to conclude a payment arrangement with the consumer.
You should notify the lender if you are unable to repay your loan on account of illness, unemployment or other similar reason affecting your ability to make payments. If the payments are in arrears for these reasons, the lender may not necessarily be allowed to impose the penalties referred to above.
Joint liability of the lender and the seller for contractual violations
If the consumer has, on account of a contractual violation committed by the seller or the service provider, the right to withhold payments or receive a refund or damages the consumer also has the same right with regard to the lender that has financed the purchase or service (such as a tour). However, the lender only has the obligation to pay the consumer the amount that it has received as a payment from the consumer.