How is the loan repayment process created?
Quickly get liquid funds again by taking out a loan
Sometimes, due to a scarcity of financial resources, it may be necessary to quickly get liquid funds again by taking out a loan. An example of a situation in which such behavior makes sense would be to take out a loan to balance the overdrawn account and thus avoid expensive overdraft interest. Even the acquisition of unscheduled and expensive things that are essential for life can lead to the inevitability of taking out a loan.
Before a bank or other credit institution approves the granting of a loan, the latter usually gets an overview of the financial situation of the borrower to ensure that the repayment of the loan can be guaranteed. A possible creditworthiness check has often been carried out fully automatically for several years. In such a procedure, the personal impression that the clerk receives from the prospective customer no longer comes into play.
The mechanism that determines whether a borrower is able to reliably repay the loan installments in the long term is called “scoring”. All data and living conditions of the borrower are automatically included in the scoring process by software. Assets or the workplace in particular play a central role here.
Since the credit institutions do not want to rely entirely on calculated scoring values, the borrower must also assign security to the lender. When financing real estate, credit companies are usually required to transfer real rights to real estate or land. In the case of consumer loans, however, the assignment of wage and salary claims is usually sufficient.
If the repayment rates within the scope of real estate financing are not serviced on time, the bank reserves the right to become the owner of the property / property and to sell it. The amount achieved through a sale can then secure the loan repayment. Generally, a loan repayment is designed so that a borrower continuously pays off the liability in monthly installments.