Financial Terms Simply Explained
Understand complex financial, insurance and energy terms. Each term is explained clearly - with examples and legal references.
Finance
Effective Interest Rate
The effective interest rate shows the true annual total cost of a loan as a percentage, including all fees and charges.
Schufa Score
The Schufa Score is a numerical value between 0 and 100 that evaluates a person's creditworthiness in Germany.
Repayment Rate
The repayment rate is the percentage of the loan principal that is repaid annually - excluding interest.
Residual Debt Insurance
Residual debt insurance pays off the outstanding loan amount if the borrower dies, becomes disabled, or loses their job.
Special Repayment
A special repayment is an additional payment on the loan outside of regular installments, which reduces the remaining debt and thus the interest burden.
Annuity Loan
An annuity loan is a loan with constant monthly payments, where the ratio of interest and principal portions shifts over the term.
Creditworthiness
Creditworthiness describes the ability and willingness of a person or company to meet their financial obligations.
Insurance
Deductible
The deductible is the amount the policyholder must pay out of pocket before the insurance company pays a claim.
Coverage Amount
The coverage amount is the maximum sum an insurance company will pay in case of a claim. It limits the insurer payment and should match the potential damage.
No-Claims Class
The no-claims class (SF class in German) determines the premium rate in car insurance based on claim-free driving time.
Type Class
The type class is a classification of the vehicle model for car insurance, based on claims statistics.
Regional Class
The regional class is a geographic risk classification for car insurance based on claims frequency in the region.
Premium Exemption
With premium exemption, an insurance contract continues without further premium payments, but benefits are reduced accordingly.
Occupational Disability
Occupational disability exists when a person can no longer perform their most recently practiced profession to at least 50% due to health reasons.
Energy
Basic Supply
Basic supply is the legally guaranteed electricity and gas delivery by the local basic supplier when no other contract exists.
Network Charges
Network charges are fees for using the electricity or gas grid, collected by network operators and added to the energy price.
Kilowatt Hour
The kilowatt hour (kWh) is the unit of measurement for energy consumption - one kWh equals the consumption of a 1,000-watt device for one hour.
Green Electricity
Green electricity is electrical energy generated from renewable sources such as wind, sun, water, or biomass.
Working Price
The working price is the price per kilowatt hour of electricity or gas consumed - the variable part of energy costs.
New Customer Bonus
The new customer bonus is a one-time payment or credit that energy providers offer new customers as a switching incentive.