When a loan is taken out, the borrower as the debtor and the lender as the creditor conclude a loan agreement. It may happen that the closed credit agreement is ineffective because it contains clauses that violate legal requirements. If this is the case, for example, see our article.
Immoral loan agreements
If a credit agreement violates morality, it is ineffective according to § 138 BGB. This is always the case when the lender unfairly over-benefits the borrower by demanding immoral interest or by signing the loan agreement of non-income-bearing relatives.
If the bank insists on granting a loan to a guarantor or the co-signature of the spouse, which is however without income, then this is immoral, because an actual use would overwhelm the family members financially. This is basically always the case if the income of the relative is not even so high that the rate could be paid out of it.
If the lender exploits the borrower’s plight and requires interest on the loan that is disproportionate to the service provided, a credit agreement is also immoral and void. A usury-type loan is used if the annual percentage rate of interest in the contract exceeds market interest rates by more than 100 percent. This can quickly be the case if the lender sells insurance together with the loan and does not include the costs in the effective interest rate, even though the borrower did not want the insurance.
The consequences of this
Theoretically, an immoral credit agreement that is void would have to be reversed. That is, the borrower would have to pay back the money to the lender. Since this is not always possible because the money may have already been spent, the lender is obliged to provide the borrower with interest-free credit. The borrower also has the right to reclaim interest already paid to the lender.
Possible mistakes in the formalities of a loan agreement
Failure to comply with the formalities prescribed by law may also result in a credit agreement being void, but with the payment of the loan amount, this formal error will be “cured”.
Beware of assignment clauses
Always pay attention to possible assignment clauses. Some loan agreements contain clauses by which the borrower assigns salary payments to the lender. In itself, assignment clauses are not unfair, but they limit borrowers’ financial leeway. In a transfer clause, the lender can have the installments seized without the claim being judicially reviewed. Thus, there is the danger that you have to pay even with unauthorized claims of the lender only once.
Credit and residual debt insurance are affiliated contracts
Very often, loan agreements lack the specific indication that credit and insurance are related businesses. As a result, the right of withdrawal is not extinguished. The borrower can withdraw from the contract until the limitation period of already repaid loans and related residual debt insurance by revocation and require the lender to reverse settlement. He can claim back the premiums of the residual debt insurance. According to the banks are separate contracts, but the case law (BGH) sees it differently.