What is a guarantee fee?

The guarantee fee is a fixed term in banking. You may hear about this when you take out a loan secured by guarantees. The guarantee or the term aval denotes the term guarantee. A guarantor or a community of guarantors secures the loan amount with its own assets via a binding commitment. Aval fees are usually associated with the financing of construction investments. Banks can pay the expense of a guarantee credit with a corresponding guarantee fee. These are the key data of this term and here the fee is calculated on the basis of the sum of the guarantees. As you can see, the Bank has also found instruments here to market these loan collateral lucratively.

Fees for the guarantee

Why can a bank charge a fee to secure a loan guarantee? This is a justified question, because the bank cannot be paid for the cost of the guarantee declaration and the security, but this belongs in the hidden interest category. Guarantee fees can be charged by the lender once or continuously over the year or term of a loan. With every loan, the bank as lender protects itself very precisely against the default risk. If the creditworthiness of the borrower is not sufficiently guaranteed, the bank can demand a guarantee from its customers. You therefore have many possibilities to secure loans. However, construction financing is usually secured by the land charge registration of the loan in the land register of the property. In some cases, however, the corresponding security is difficult to realize and lenders, the bank looks for further security options. The bank charges the guarantee fee for this expenditure. This fee for the guarantee is set and calculated at approximately 1 % of the guarantee amount. The The amount of the guarantee does not necessarily have to correspond to the amount of the loan, but it is also possible that you can provide various securities for a loan. On the other hand, it is also due to your negotiating skills, because here you are relatively free as to what type of credit protection you may choose. Banks demand these hidden costs here and you should be careful to get the loan as cheap as possible. After all, in the case of a guarantee, most of the work is done by you as the customer, and the guarantee fee is used obligatorily so that the bank receives fees again.

Maximum limits of the guarantee fee

Aval fees are also due if a guarantee given for credit security is not honoured. You can already see from this that the interest is charged in the form of an additional fee. The guarantee fee is quite lucrative for banks. Although the customer can actually provide sufficient collateral, the bank additionally secures itself with a guarantee. You will now wonder how this fee and the reason for a guarantee are created. The guarantee fee and the associated guarantee are required for reasons that are not necessarily transparent. Apparently there is a set of rules here, but the lender can always demand the collateral he wants. After all, the bank gives the money and you as the customer are in a relationship of dependence. The guarantee fee is always justified by the bank with a processing effort. You cannot always comprehend this expenditure and the guarantee fee is capped in its amount. The Bank may charge a maximum guarantee fee of 2.5% of the guarantee amount. Usually, however, the guarantee fee will amount to 1% of the guarantee amount, because you as the customer should not be cheated. At the moment there are very few Interest and with a construction financing, the interest is about 1.3% so the guarantee fee is also bearable and you have another good way to secure loans through guarantees.