Grace period
The grace period is the period when the debtor taking out the loan already pays the interests (and other costs), but does not yet repay the capital for the loan taken out.
After concluding the loan agreement, the borrower can draw down the loan amount in one or more installments during the availability period. As a basic rule, after drawing down the loan amounts, you must start paying the interest without delay with the frequency according to the interest periods specified in the loan agreement (typically every one or three months). At the same time, the question is when the capital must be repaid.
In this regard, the grace period and its end provide guidance. The grace period is the period during which the borrower does not repay the capital part of the loan, but only has to pay its interest (and other bank fees).
In individual credit agreements, the grace period from the conclusion of the agreement is longer than the availability period, but shorter than the term.
After the end of the grace period, capital repayment begins in the manner and according to the schedule specified in the loan agreement.
The possible length of the grace period varies by credit scheme. The relevant information is contained in the banks' condition lists and announcements. The length of the grace period is usually a maximum of 1-3 years from the conclusion of the contract. The concluded credit agreement defines the end of the grace period valid for the given transaction exactly, i.e. by date.
Last edited: January 10, 2023