Interest

Interest is payment for lending money for a defined period of time.

As far as the creditor is concerned only interest in the case of default and interest over legal costs is of importance. In the case of a financial claim, entitlement to default interest requires the debtor to be in default. Default becomes applicable automatically 30 days after the invoice or a similar request for payment has been forwarded. In the case of regular payments such as for instance rent, default only applies if the debtor does not meet his payments on the agreed calendar dates. In such cases the interest rate for that year is five per cent more than the valid interest rate of the German Federal Bank applicable at the time.

The legal interest rate for private persons amounts to 5% + basic interest rate of the German Federal Bank and for businessmen 8% + basic interest rate. The basic interest rate of the German Federal Bank is determined and fixed annually on 1.1. en 1.7. respectively. W.e.f. 1.7.2003 the basic interest rate amounts to 1.22 % (was 1.97 %). Consequently, the legal default interest rate for private persons amounts to 6.22 % and for businessmen 9.22 %.

This ruling with regard to interest levels also applies to businesses concluding contracts. However, in both cases it only involves the lowest interest rate. If for some reason or other a higher interest rate can be applied, then it will be made applicable. Entitlement to interest over legal costs becomes effective at the moment the case is brought before the court i.e. w.e.f. the day the debtor is served an enforcement order or notification of legal proceedings.

Interest entitlement is limited to 3 years. In order to work out the time limitation reference is made to the link "Statute of Limitations".