Follow-up financing

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The follow-up financing ( English follow-up financing ) is banking that at the end of the loan agreement provided for fixed-interest period to be carried out agreement on a new lending rate throughout the loan term . This does not change the original loan term. The originally agreed credit period is only extended in the event of a prolongation .


The term follow-up financing is misleading. This could also mean new financing ( e.g. rescheduling or consolidation ) that follows on from an expired financing. To distinguish it, it is also called real follow-up financing, while spurious follow- up financing refers to changes in interest rates, where the bank and customer can agree on new loan rates. The change in other credit conditions is not the subject of follow-up financing.

In the lending business , there are various interest rate agreements. On the one hand, a variable interest rate can be agreed that automatically adapts to current market developments . On the other hand, a fixed interest rate remains constant during its term and is independent of the current interest rate situation. In addition to these types of interest , the definition of the interest term is also part of the interest rate agreements, also known as fixed interest rates . Fixed interest rate is the period agreed between the credit institution and the borrower during which the agreed interest rate may not be changed. The borrower has the choice of agreeing the type of loan interest for the entire loan term or only for a certain shorter period. If the borrower opts for the latter option, there are at least two fixed interest periods. A new interest rate agreement is made at the end of each fixed interest period. This interest rate agreement is known as follow-up financing.

Legal issues

In law, the type of interest is called “fixed interest rate” and the fixed interest period is called “fixed interest rate agreement”. For consumer loan contracts , Section 493 (1) BGB stipulates that the lender must inform the borrower no later than three months before the end of the fixed interest rate whether he is ready for a new fixed interest rate agreement . If the lender agrees to do so, the information must contain the borrowing rate offered by the lender at the time of the information. The prerequisite is that the "fixed interest rate agreement" ends during the loan term. However, this provision does not result in any obligation on the lender to submit a new interest rate offer. The rule applies to both types of consumer loan contracts, general and real consumer loans. According to Section 489 (1) BGB , the borrower is only entitled to terminate the loan after the fixed interest period has expired if there is no new agreement on the borrowing rate. In this case, the borrower has the option of changing the lender through loan repayment , the term follow-up financing fulfilling its second variant. The terms of a fixed interest period can vary between one month and 10 years. Fixed interest periods of 15 years are also possible, but here Section 489 (1) No. 2 BGB grants the borrower an ordinary right of termination, so that the credit institutions usually refrain from this option. Banks must hedge the risk of termination by the borrower by means of a swap , which increases the cost of a 15-year fixed interest period.

These rules only apply to consumer loans , so that shorter notice periods of up to 1 month are possible and common for corporate financing.

Loan types

All money lending such as consumer loans , real estate financing , investment loans , roll-over loans , stand-by loans or the Revolving Credit Facility can contain fixed interest periods. Fixed interest periods only make sense if the total term of these types of credit is more than a year. Before the respective fixed interest period expires, the lending bank submits a new interest rate offer to the borrower, which is based on the current interest rate level on the financial market , the borrower's current creditworthiness and the credit margin . The follow-up financing usually only relates to the loan interest and not - especially in the case of installment loans - the repayment or other loan terms.


After a fixed interest period has expired, the borrower bears the risk of having to bear the costs of the follow-up financing at an interest rate that has meanwhile increased ( interest rate risk ). This risk is at the core of the Modigliani-Miller theorem developed in 1958 . However, the interest rate risk does not only begin then, but with the agreement of a fixed interest rate, because there is a risk that the interest rate level will fall below the fixed interest rate during the fixed interest period. While the fixing of the fixed interest period is decisive for the interest rate risk, the loan term is influenced by the creditworthiness of the borrower.

Loan repayment

In the case of follow-up financing, the borrower is not tied to his original lender, but can instead switch to another lender by way of loan repayment if the latter makes him a cheaper interest rate. As a rule, however, the change is associated with obstacles, especially if loan collateral is to be transferred and possibly subject to a new collateral assessment. Comparison offers from two or more banks provide an overview , whereby the effective interest rates must be compared with one another. Direct banks in particular usually offer a lower interest rate, but therefore do not provide advice . Since collecting and comparing offers takes a considerable amount of time, it is important to consider whether to hire a free broker .

Individual evidence

  1. ^ Hermann Staub / Claus-Wilhelm Canaris / Mathias Habersack / Carsten Schäfer, Großkommentar HGB, Bank Contract Law 2: Commercial Banking: Payment and Credit Business , 2015, p. 763
  2. Klaus U. Schmolke, Limits to Self-Binding in Private Law , 2014, p. 746
  3. ^ Franco Modigliani / Merton H. Miller , The Cost of Capital, Corporation Finance, and the Theory of Investment , in: The American Economic Review vol. 48, 1958, p. 261 ff.