If financing is used, be it in the private or in the commercial (commercial) area, the resulting financing costs must always be taken into account. In addition to the obvious costs, namely the loan interest to be paid and the processing fees occasionally incurred, there are other costs that may arise in connection with the financing, but which are often not initially factored in by the borrower. These financing costs include, for example, the commitment interest or, to put it more generally, the provision commission. The provision commission does not automatically apply to every borrowing or financing but is only calculated by the credit institution under certain circumstances. In practice, such provision commissions occur primarily with real estate financing, more precisely with real estate loans.
Behind the provision commission
Whether the commission is calculated or not is usually determined individually by the relevant bank, because there is no obligation here. But what exactly is behind the provision commission? The provision fee is calculated whenever the bank generally makes a calculation whenever there is a certain period between the availability of the financing amount on the one hand and the use of the borrower on the other. Most of the time, the loan amount received is also called up a few days or a few weeks after being made available for payment. However, if this does not happen because, for example, the completion of a real estate purchase contract is delayed, the bank can charge for the fact that it de facto keeps the loan amount “ ready ” for an unnecessarily long time.
During this period, the capital represents quasi dead capital for the bank, because the capital is tied up and therefore cannot be used profitably. An increased administrative effort is also sometimes given as a reason for estimating the provision commission. After which past period the bank requests a provision commission and the amount of the commission is – of course within the legally permissible framework – at the discretion of the respective credit institution. The usual rate in this section of fees and commissions is around 0.20 to 0.30 percent for each month on which the loan amount is not called up. The percentage refers to the loan amount.
When to make a comparison?
Some lenders are more accommodating and only charge the provision commission, for example, if it has been more than six months between the provision and the utilization of the loan. But of course there are also lenders who charge a commitment commission after three or even a month. So it is certainly worthwhile for the borrower to make a comparison in this area of financing costs before joining the loan contract, because the cheapest interest rate does not always have to be the deciding factor for which lender one ultimately decides.