In the case of car loans , this security usually represents the car purchased and, in the case of real estate loans, the real estate itself. If, therefore, there is a default in the repayment of the loan installments , the bank will in most cases resort to the material values associated with the credit. However, if it is not the case, as in the case of the first two loans for so-called earmarked loans, then other means must be used to secure the loan. As a rule, the characteristic of a regular income from an undeclared, at least 6 months non-terminated employment relationship as well as a perfect credit rating as accepted security applies.
Assignment statement as additional collateral
However, banks are increasingly resorting to the form of a written declaration as a credit protection by the borrower – the declaration of assignment. It is increasingly necessary for consumers to sign a declaration of assignment when concluding a loan agreement. This declaration of assignment is considered as a special form of protection , because this way the bank secures its claims against the borrower. Should the situation of impending loan default occur as a result of unredeemed loan installments, the bank will use its present declaration of assignment.
In this statement, the borrower agrees to the ” assignment / provision ” of claims for certain benefits to the bank. What in the case of an impending loan default on the claim to a portion of his monthly salary. Thus, if the borrower fails to pay the agreed installment despite several warnings, the bank may disclose the statement to the employer and make its claim. The latter then transfers part of the salary in the amount of the outstanding installments directly to the bank. This is until the agreed loan installments are received by the bank on a regular basis or the loan has been repaid in full via the assignment statement.
The declaration of assignment – the summary
The creditor thus demands collateral in most cases in order to be able to give credit to the debtor. With the assignment for credit granting the creditor secures against the debtor. The claims are transferred to the creditor. The assignment for credit includes types of pay and wages as well as pensions. Unemployment benefits, housing allowances, ALG II and the like are excluded from the assignment. The assignment of credit (loan transfer) is also a form of selling distressed loans. This links the assignment of the loan receivable by a borrower by the financial institution to a third party. If such a procedure occurs, the debtor receives a new creditor to whom he must pay his credit installments in the future. The German banks can pass on individual contracts as well as complete portfolios as part of a loan assignment. A customer may oppose this type of assignment by an assignment exclusion.