§ 1-7. Credit agreement, personal guarantee, mortgage and other credit terms
Machine-translated from Norwegian. The Norwegian text is the one that applies. Read the original in Norwegian.Norsk English العربية Polski Українська
In brief
- A credit agreement (kredittavtale) is an agreement on credit, such as a loan or deferred payment; a personal guarantee (kausjon) means standing surety for another person's credit agreement.
- A mortgage (boliglån) covers credit secured by collateral (pant) in a home and credit for buying or maintaining ownership of land and buildings.
- The section also defines effective interest rate (effektiv rente), credit costs (kredittkostnader), overdraft facility (brukskontokreditt) and foreign currency loan (valutalån).
The text of the law (unofficial translation)
§ 1-7. Definitions concerning credit agreements and personal guarantee agreements
- a credit agreement secured by collateral or an equivalent security used in an EEA (EØS) state, in real property used for residential purposes or mainly not used for business purposes, or in a right connected to such property
- a credit agreement whose purpose is to acquire or retain ownership of land or of existing or planned buildings.
- credit where the customer's income and assets are in a currency different from the currency stated in the credit agreement, or
- credit where the currency of the EEA state in which the customer resides is different from the currency stated in the credit agreement.
What does this mean?
The section defines the terms used in Chapter 5 on credit and Chapter 6 on personal guarantees. A credit agreement is an agreement on credit, for example a loan or deferred payment. A personal guarantee means that a person, the guarantor, stands surety towards the lender for a credit agreement that someone else has entered into, either through a conditional obligation or through a guarantee. The definition also covers lease financing under § 5-23 second paragraph, meaning a lease that in practice works as a credit purchase without the lessee being obliged to become the owner. There, the consumer (forbruker) can give notice at any time, and the notice period cannot be longer than one month.
A mortgage is defined in two ways. The first is credit secured by collateral or the equivalent in real property used as a home or not mainly for business, or in rights connected to such property, and the security may be located in an EEA state. The second is credit to be used to buy or keep ownership of land and buildings, including planned ones. The term is used, among other places, in § 3-40, which concerns the reflection period (betenkningstid) for mortgages and personal guarantees for mortgages.
The remaining paragraphs explain cost terms and loan types. A lender is a service provider offering services covered by Chapters 5 and 6. The effective interest rate is the credit costs as a percentage per year of the credit amount, calculated using a mathematical formula and assumptions laid down by the Government in regulations. Credit costs cover everything the customer must pay in connection with the credit, such as interest and fees. The total amount of credit available is the upper limit for, or the sum of, the amounts that can be drawn. An overdraft facility is an explicit agreement that the customer may use more money than there is in the account. A foreign currency loan is credit where the customer's income and assets, or the currency of the country of residence, differ from the loan's currency. Example: a customer earns and lives in one currency, while the loan is in another. Then it is a foreign currency loan.
This section is referred to in § 1-2 (the scope of Chapters 2 to 6).
- § 5-23Lease financing: when a lease counts as credit
- § 3-40Reflection period for mortgages and personal guarantees for mortgages
- § 1-2Which chapters of the Financial Contracts Act apply to your agreement
- § 1-4Who is a consumer, customer and service provider?
- § 1-5Payment service, payment account and other terms for accounts and payments