What is a fiduciary loan?

In contrast to conventional loans, a trustee loan has three main players. A fiduciary loan is a type of credit that is executed via a third party. As a rule, the trustee is a bank or insurance company that ensures that the credit transaction is conducted properly. But the state can also assume this function. A fiduciary loan is also known as a continuous loan, because the fiduciary does not grant the loan, but only manages the process.

The following three players are part of the lending business:

On the one hand, the trustor, who provides the capital. The source is usually the state or state banks. A well-known donor is the Kreditanstalt für Wiederaufbau (KfW).

Then the trustee, who is responsible for proper settlement, collects due instalments and interest and forwards them to the settlor.

The third actor is, of course, the borrower. The money is applied for as with ordinary loans. Applicants can be both private customers and companies.

Who offers a fiduciary loan?

In Germany, fiduciary loans can be opened in almost all banks. Especially Volksbank-Raiffeisenbanken and Sparkassen are known for their service. Since they have a high degree of awareness in society anyway, they are merely expanding their social promotion mandate. Many banks offer a fiduciary loan in combination with other loans. Future real estate owners can, for example, also add a real estate loan. In this way, the bank or trustee also benefits from the traditional provision of credit and has acquired a new customer by offering a trustee loan.

What are the advantages of fiduciary loans?

A fiduciary loan offers the fiduciary the opportunity to The advantage is that he does not bear any credit risk, as he acts on behalf of third parties. Liability therefore only applies to the proper forwarding of the credit service and the technical processing of the credit.
This is especially convenient for banks as trustees as they only manage the credit. And since the trustor provides the capital, lending does not burden the bank’s own resources.

Such a loan is also worthwhile for the trustor, as he does not have to provide his own administrative resources. Although he bears the liability of the credit and pays fees to the trustee for it, these are much lower than his own credit administration.

But such a loan can also be extremely useful for the borrower. Finally, the conditions are far below market rates.

What is the fiduciary loan used for?

The purpose of a trust loan is usually determined in advance and is prescribed by the settlor. Most of the funding comes from funding programmes with a socio-political or macroeconomic background. Common uses include energy-saving measures (e.g. photovoltaic systems), family support or housing construction.

How is the payment made?

There are various options for paying out a trustee loan. Sometimes the trustees pay out the whole sum immediately, sometimes only in part. For example, student loans granted on a fiduciary basis are usually only disbursed in instalments. Even in the case of start-up loans, proportionately disbursed sums are not unusual.

The granting of fiduciary loans mainly involves public funds which are passed on by the fiduciary. For this reason, states also use trust loans to promote the development of state society as a whole. Objectives include targeted regional economic promotion, a grant for investment in This includes social infrastructure, as well as home ownership and business start-ups.

Further useful information can also be found in the following video. Other important types of credit are also presented there.

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