at credits and loans there is no getting around the topic of interest. Interest comes in many forms. After all, interest is the most important source of income for a bank. In the case of advance interest, the bank charges the agreed interest for a loan disbursed earlier. Since advance interest is due to the earlier payout however, are not in the installment plan, they sometimes make borrowers feel uncomfortable.

**Already knew? **– In fact, interest on loans is the only fee allowed by law, which is why serious loans without Schufa have to make do without any upfront costs

## What is advance interest?

What you can learn here

When redeeming one installment loan Each installment contains the interest for one month, which always has 30 days at banks. If the first installment is collected later than 30 days, the period exceeding 30 days will fall. **advance interest** on. The interest rate of the advance interest corresponds to the agreed rate **borrowing rate**. Thus become** no additional fees** due, since the borrower has borrowed the money for a longer period of time.

**Preliminary interest is charged by banks if the borrower receives a loan before it is scheduled to begin at the beginning of the month. Since the advance interest corresponds to the loan interest, you have no disadvantage from it. Although you pay more interest overall due to the longer term, you also have the loan for longer.**

Advance interest often accrues when a loan is disbursed in the middle of the month. This is because Banks book the first installment often not debited immediately at the beginning of the following month. Instead, the debit is usually made one month later. When the loan is disbursed in the middle of a month, that is, about 6 weeks after the disbursement.

The following are included in the rate However, interest would then only be payable for the full month. The bank calculates the remaining days of the first month separately as advance interest. This extends the term of the loan by half the first month. Because in this time no Repaymentbut only an interest payment in the form of the advance interest.

## Advance interest is not to be confused with ...

**1) Commitment interest**

Prepayments are the opposite of **Commitment interest, which** one mainly from **construction financing** knows. With the commitment interest, the bank charges a fee for having reserved the money for you and not paying it out until a later date than planned. On the other hand, the advance interest is an interest that has to be paid due to the earlier payment of the loan.

### 2) **advance interest **

Prepayments are also not included advance interest to confuse. This means fees for accounts. The bank charges interest on the advance if the cash account or fixed-term deposit account is closed prematurely.