Joint debtor – definition
The designation joint debtor is regulated by law. All relevant legal requirements in this regard are regulated in § 421 of the German Civil Code (BGB).
The term joint and several debtor does not mean that a single person is solely liable for something, but on the contrary, the joint and several debt is spread over several shoulders and that each individual debtor has to theoretically and practically stand up for the entire debt until a debt has been fully repaid.
The term joint and several debtor plays a central role when it comes to granting a large building loan or a large loan. The BGB stipulates that the lender may demand the loan amount in whole or in part from each joint debtor of the loan.
The Federal Ministry of Justice and Consumer Protection also makes the statutory provisions available online. All important paragraphs can be found here ».
- The lender must adhere to the contractually agreed repayment. In the case of a contractually agreed repayment, he cannot simply demand the total amount back at once.
Joint and several debtors – advantages and disadvantages
If two or more people take out a building loan or a loan and register as a joint debtor, this has many advantages:
- improved credit terms
- higher creditworthiness
- higher loan amount
- distributed responsibility
However, there are also disadvantages to this variant of the loan contract, which you should inform yourself about beforehand so that you know about the possible risks.
The disadvantages of a total debt include:
- everyone is jointly and severally liable (for the total amount)
- the lender can demand the outstanding amount from each debtor in the event of late payment
- separation problems may arise
- With the consent of the bank and all borrowers, it is in principle possible to rewrite the contract to one person, but this is associated with higher costs and longer terms.
How important is total debt for lending?
Many banks want special security at very high levels. Loan amounts and low creditworthiness of several borrowers (debtors). The loan agreement then stipulates that each individual borrower is jointly and severally liable. In this way, the debtors receive their money and the bank has security through the consent of the borrowers that everyone is responsible for the full amount.
Lending to multiple debtors is therefore a very welcome measure for many banks. In this way you want to ensure that the money is returned.
Joint debtor – conclusion
The term does not refer to a person, but to the amount and distribution of liability.
Section 421 of the German Civil Code (BGB) regulates this form of credit business.
In the case of a loan agreement with several debtors, everyone is liable for the full amount of the loan.
The bank often insists on this form, especially for large loan amounts.
Disadvantages for joint and several debtors usually arise when the borrowers are separated or divorced.
Checklist: How it works with construction finance
Building or buying your own house requires a lot of preparation. And even if this project has to be planned individually, there are some points that should be considered in advance. Because mistakes in the calculation for the home loan can be expensive. With the help of this checklist you can calculate your budget exactly and go well prepared to the counseling session at the bank.