The topic of consumer protection in payday loan consolidation – the main regulations

Consumer protection Loans: In Germany, one’s own finances, be they income or wealth, are the absolute private property of every citizen. The Basic Law protects the citizen against improper insights of the state, the BGB and other laws impose clear rules on the handling of sensitive data for credit institutions and credit bureaus. Such circumstances have their legitimacy in the age of the internet, but if they are misused, the creditworthiness of an individual can be permanently adversely affected.

In the following, we will explain the basics of a credit agreement and, in particular, point out important consumer rights that are intended to protect against high costs and other disadvantages.


Definition of consumer loan

Definition of consumer loan

Credit agreements concluded between a credit institution and a consumer are called consumer loans. Decisive for the naming were the terms of the consumer and entrepreneur defined in §§ 13 and 14 BGB. Sections 488 to 490 BGB generally regulate the requirements for a loan, whereas Sections 491 to 505 specifically regulate the standards of a consumer loan. This is to ensure that consumers and thus lay people no major disadvantages due to the granting of credit must carry. So-called minimum content will specify, such as net loan amount or effective annual interest rate, which is a comparison option. Such principles also apply to the popular account models with integrated credit card, as they are listed under in one of the lending portal site, for example, according to objective criteria and compared.

While the above paragraphs and regulations refer to the credit lines of credit cards, they can not be used for overdrafts (colloquially also credit line). This credit is namely flexible and defined in particular by concrete foundations within the terms and conditions and other agreements, so that for example revocation periods and the like are treated differently.

Consumer Protection Loan Consolidation: It is important to pay attention

In order to be able to compare offers as objectively as possible in the course of a financing, one must focus on a few criteria.

  • A so-called form, from which all important details and bases of the contractual relationship can be taken, must be issued by each bank obligatorily. At the same time, you always demand a repayment plan – this way you can better control possible special repayments .
  • So-called instant loans are a product often advertised by intermediaries that in reality have little to do with the advertising messages. So while one suggests a loan, in truth, “debt is regulated” or “assets managed”. Such offers are dubious and, above all, legally considered a gray area, so that adverse conditions for consumers must be assumed.
  • Make sure that offers are not calculated in combination with a residual debt insurance. They sometimes increase the APR significantly, which is a disadvantage, especially for longer maturities.

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