{"id":30568,"date":"2023-10-15T17:33:14","date_gmt":"2023-10-15T15:33:14","guid":{"rendered":"https:\/\/www.fiala.de\/?p=30568"},"modified":"2026-06-22T21:42:02","modified_gmt":"2026-06-22T19:42:02","slug":"over-collateralisation-of-bank-loans","status":"publish","type":"post","link":"https:\/\/www.fiala.de\/en\/over-collateralisation-of-bank-loans\/","title":{"rendered":"Over-Collateralisation of Bank Loans in Germany"},"content":{"rendered":"\n
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Legal Aspects and Solutions<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n
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The over-collateralisation of bank loans<\/strong> affects both private borrowers<\/strong> and businesses<\/strong> and can have considerable financial consequences.<\/p>\n

Let us first take a family as an example, one that wishes to finance a home<\/strong> by means of a loan<\/strong>. They approach their house bank with the object of their desire in tow, available for a defined purchase price<\/strong>. One would reasonably expect the bank to take the property to be purchased as security<\/strong> for the loan, allowing the family in return to buy the house<\/strong>. That would be the classic case of a bank loan that is not over-collateralised.<\/p>\n

Frequently, however, the bank requires not only the property as <\/strong>security <\/b>for a mortgage loan to be granted, but also further assets that significantly exceed the value of the loan<\/strong>. This means that in the event of payment difficulties<\/strong>, not only the family\u2019s home<\/strong> but also additional assets<\/strong> are at risk in a liquidation<\/strong>.<\/p>\n

For companies, over-collateralisation can be similarly problematic. Imagine a medium-sized enterprise<\/strong> needs capital for an expansion or the acquisition of new machinery<\/strong>. The bank demands as security<\/strong> not only the operating resources to be financed, but also additional company assets<\/strong>. This can considerably impair the company\u2019s liquidity<\/strong> and flexibility<\/strong> and, in the event of insolvency, may even spell the financial end<\/strong> of the business.<\/p>\n

Such cases of over-collateralisation<\/strong> and comparable ones can be extremely disadvantageous<\/strong> for borrowers. In the worst case, this could even mean the loss of property and other assets<\/strong>. Additional security<\/b> that banks frequently demand from borrowers includes, for example:<\/p>\n