Vorfälligkeitsentschädigung

Vorfälligkeitsentschädigung, often abbreviated VE, is a fee charged by lenders when a borrower repays a loan before the contractual end date, especially for loans with a fixed interest rate such as real estate mortgages. The purpose of the VE is to compensate the creditor for the expected loss of interest and other costs resulting from the early termination of the loan.

In Germany, the concept is tied to consumer lending rules and the Civil Code (BGB). § 489 BGB allows borrowers to terminate a consumer loan after a fixed-rate period, but the creditor may demand VE if the loan is repaid early during the fixed-rate phase. The VE must reflect the lender’s actual loss and be calculable from the contract, with transparency requirements typical in the applicable law and directives.

The calculation of VE is contractually defined or based on standard banking methods. It generally depends on factors such as the remaining fixed-rate period, the original interest rate, and current market rates at the time of repayment. The aim is to approximate the economic loss to the lender, discounted to present value. In many cases the VE is limited to the creditor’s demonstrable losses and must not be excessive; some agreements require the calculation to be disclosed before repayment.

Practical implications include that VE can make early repayment more expensive for borrowers during the fixed-rate period. After the fixed-rate term ends, early repayment is often possible without a VE. Consumers can compare loan terms, seek advice, and, where appropriate, negotiate or challenge charges that seem disproportionate. See also sections on consumer credit law, mortgage loans, and prepayment rights.