Benefit from low interest rates when borrowing

There are a whole range of different and individual reasons that can speak for taking out a loan.


Overall, interest rates will remain at a very low level in 2015 as well. Of course, the people looking for profitable investments are not happy because it makes it much harder to invest their money accordingly. Nevertheless, there are also opportunities in the current situation on the interest rate market to invest his money profitably.

For borrowers, of course, the current situation is not unpleasant, because a loan is relatively cheap to get and also the rescheduling of existing loans can be quite useful to reduce the monthly burden of credit rates. You can also find interesting information about financing topics here.


The development of interest rates since 2011

Especially in the recent past, the interest rates were actually almost only the way down, which incidentally is not just a feeling of consumers, but a fact that can be proven with facts. In the inserted table, it is easy to see the evolution of consumer loan interest rates over the past four years. If you take a closer look at the values, you quickly realize that there are significant differences depending on the interest rate commitment.

Time Fixed interest rate less than 5 years Fixed interest over 5 years
  • July 2011
  • July 2012
  • July 2013
  • July 2014
  • 5.75%
  • 5.35%
  • 5.15%
  • 4.95%
  • 8.35%
  • 7.85%
  • 7.84%
  • 7.57%


This table makes it easy to see what the trend in the effective interest rate has been over the last few years, and in fact, the trend has actually continued to go down. In addition, it can also be seen that there has been improvements for borrowers in both short-term loans and long-term loans.

Nevertheless, from the customer’s point of view, one has to complain that the credit institutions have passed on to the consumer only very little the very favorable conditions they have received from the European Central Bank. Of course, this is also due to the fact that the financial institutions primarily want to make money with the favorable interest rates and therefore still relatively cheaply pass on the loans to their customers.


This is how the Germans react to the interest rate situation

The program Plusminus , which regularly runs on the ARD, had already reported in 2014 that many German citizens resume loans due to the low interest rates. This is simply because families prefer important purchases because of the low interest rates they offer. Likewise, it is increasingly the case that when buying a car a better model is bought, because the interest rates are so low that you can afford quite a bit more car.

But especially with homeowners are currently made unusually many modernizations, because the purpose of modernization loans are currently extremely cheap. If you are still looking for suitable modernization loans, where you will get important information about special subsidies. Basically, there are a whole range of different and individual reasons that can speak for taking out a loan.

Real Estate Full Financing

Why You Need This Information?

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We have to differentiate between real estate financing and finance in two ways:

  1. The real estate financing, where the bank finances 100% of the purchase price and you pay the incidental costs yourself.
  2. A financing completely without equity , where in addition to the purchase price and the so-called ancillary purchase costs should be co-financed or need. The purchase costs are usually the land transfer tax, the notary and court costs and any brokerage fees.

In contrast to variant 1, which is now very common in practice, variant 2 is more difficult to illustrate for several reasons. There is only a limited banking group that supports full financing including ancillary costs. In addition, even higher credit and object requirements are made.

What many aspiring borrowers can not understand is the way the lending bank rates the security (the object to be financed).

An example of a construction financing without equity :

Let’s assume that the purchase price of a detached house is € 100,000 and let us assume that the additional costs are 10% (the real estate transfer tax and the brokerage fees may differ at the country level).
Since you are now seeking a financing without equity , you need € 110,000 loan amount (€ 100,000 purchase price + € 10,000 ancillary costs). Now, the bank uses its own valuation principles to value the property as collateral.

Now comes the important part: even if the property has a market value of € 110,000, for example, the bank in most cases is based on the so-called lowest value principle and therefore uses “only” the purchase price of € 100,000 as a basis. This in turn means that a loan of € 110,000 will result in a loan overdraft of more than 100%, which means a greater risk for the bank.

Exceptions to the lowest value principle are usually only made in practice if the seller of the property with the buyer has a family connection of the first degree, ie a sale takes place within the family.

It does not do any good to negotiate the purchase price down as the value of 110% always remains the same. Therefore, a 100% financing plus additional costs is much more complex than a pure purchase price financing, where the additional costs are borne by yourself.


Requirements for a real estate full financing :

  • The borrower must have a corresponding credit rating. That is, the monthly income, after deduction of all costs and the new loan installment, should still have enough leeway (optimally at least 10% of the net income). Please also read the article: How much property can I afford?
  • The sum of the assets (savings, surrender values, real estate, etc.) should be higher than the sum of the liabilities (eg residual debt of existing loans). With “negative assets” financing including ancillary costs is almost impossible.


Advantages of a mortgage without equity :

  • Existing assets may be used elsewhere or may otherwise generate returns.
  • They keep a minimum of liquid funds behind them to respond to emergencies.


Disadvantages and risks of a fully financed property:

  • In general, one can say that the more equity is invested, the better the interest rate. As a result, the interest rate condition is not optimal.
  • If there is a compulsory sale, eg through an auction or through separation / divorce, debts usually remain, if not much has been repaid.
  • In general, the terms are longer and / or the monthly installments higher, which can lead to bottlenecks.


3 Tips for a Real Estate Full Financing:

  1. Be sure to make financing flexible, ie to build up special repayment options and repayment rate switching options. There are banks that even allow you to suspend repayment for 1 or 2 years if there is a bottleneck.
  2. In a low-interest environment, you should focus on the compounding of interest rates for a longer time, that is 15 or 20 years. That gives you more security.
  3. Make sure you have enough liquidity and spend no more than 35-40% of your total income on the property each month (including management costs and maintenance costs).
  4. In any case, also check the KfW funding programs . In some cases, the monthly installments can be lowered by cheaper interest rates.



Full financing makes sense only if you have enough free funds or if you do not want to liquidate existing assets or serve as collateral, as otherwise it may generate more return. Especially if you want to buy and rent real estate, the concept with less equity can be the better.

Otherwise, do not make your life more difficult than it is and first make reserves. Possibly. Just rent a nice house and build casually relaxed assets and if something should go wrong, you have only 3 months notice.

Find the right safe for the right situation

Anyone who has investments such as gold, diamonds or similar objects must also think about safekeeping. 

Find the right safe for the right situation

A safe should protect what is most valuable to its owner. However, an open vault often does the opposite.

The burglar discovers the safe immediately and has enough time to crack it. What should protect the safe, then lies on the presentation plate. Therefore, it is important to install the right safe in the right situation.


Hide the safe if possible

So that the burglar does not even get the chance to crack the safe, the owner should hide it if possible. Anyone who builds a new house has an easy game in this regard. The vault can then be inserted directly into the wall or into the ground. Later, he can then be covered with a picture or a rug. Floor and wall safes also have the advantage that the burglar can only tackle them from scratch. Here, however, the vault is most secure and can only be broken up very hard. If you live for rent or do not have the options for a wall or floor safe, should buy a furniture safe. This is integrated directly into a piece of furniture, such as the closet, making it harder to find and crack. Anyone who chooses a free-standing safe despite these tips should make sure that it is either firmly anchored to the ground or heavier than 500 kilograms. Otherwise there is a risk that the long finger will simply take him along.


Fire protection for document safes

For companies recommend the experts of special document safes . These are specially designed to protect individual documents or entire folders from external access as needed. In addition, fire protection also plays an important role here. Important documents such as certificates, contracts or vehicle registration documents are easily flammable but difficult to replace. But even digital storage media such as CDs and USB sticks are susceptible to fire and heat damage. Many document safes are therefore designed to withstand a fire for a period of time. In general, the levels are here with a fire resistance of 30, 60, 90 and 120 minutes. In addition, many of them have to complete a fall test of up to nine meters. In an emergency, a fire can cause a house to collapse. Even safes, which were installed on the upper floors, can then survive the disaster intact. Other tips for the safekeeping of corporate documents have already been summarized for you in this article .


Insurance in case of burglary

Before buying a safe, you should always be aware of the sum up to which the insurance company insures the valuables stored in it. Basically, there is no fixed rule here, every insurance can set this according to their own ideas. For the buyer, however, there are certain guideline values, the so-called safety levels, at which he can orientate himself. These indicate how resistant a safe is. If the security level is higher, an insurance company will insure the contents of the vault even with a larger sum. Depending on whether the security cabinet is used privately or commercially, the sum insured usually varies. A table with the security levels to which you can orient, can be found here .


When buying a property benefit from cheap Loans

Anyone who wants to invest in real estate now has every opportunity.

When buying a property benefit from cheap credit

Because the interest rates are low on the lows and loans thus obtain cheap. Especially for investors is now the right time to invest in real estate, so they can benefit from the cheap loans and secure an interesting return.


Real estate as investment

Real estate is still a very good investment , which is quite profitable over the years. Especially when it comes to larger apartment blocks or commercial real estate. The houses, if they are in good condition, usually wear themselves at the beginning of the purchase and are removed in a few years. If the property has to be renovated, this is usually not a problem. Because even if money first has to be put into the property, this can be taken again in a short time, so that here too the property can carry on its own. Anyone who always renovates and refurbishes, while also having to put some money into the real estate, but has the guarantee that the tenants are satisfied and loyal tenants over the years.

Of course, real estate has the advantage that they are usually safer, like other investment options. While funds or stocks are reasonably safe if you do not take a high degree of risk, they do not yield that much return. Those who take a high risk when investing in equities also have a higher return, but the danger of losing everything is just great.

High return opportunities through investment in real estate. Starting with small amounts.

Numerous advantages for a property

Anyone who acquires a real estate investment has several advantages. These include, for example, that a property

  • is a secure investment
  • a value stability is maintained or even increases
  • Build up assets step by step
  • is crisis-proof
  • is protected against inflation
  • a sure old-age provision is
  • contributes to improving creditworthiness

Of course, there are also some disadvantages that you have to be aware of in advance. A property means, especially at the purchase, high costs. Furthermore, a property pays off only in the long term and is not suitable for short-term investors. But also the administration costs a lot of time, if it should not be put into foreign hands. If the real estate owner does not want to take care of the administration himself, costs will also be incurred here, which must always be taken into account when purchasing.


Find the right loan for the property

There are a lot of loan offers and it is not always easy to find the right loan. While the house bank often does not pass on the favorable lending rates or refuses a loan, one has all possibilities with online banks. Nevertheless, an appointment should be made at the house bank to obtain a quote. At the same time, offers can be obtained from the various online banks. To get the cheapest lending rates and the best terms, a comparison on is worthwhile . This comparison shows not only the monthly installment, but also the borrowing rate and the annual percentage rate. Furthermore, you also have an overview of how satisfied the customers are with the online bank. Now you can calmly select the favorites and compare them accordingly.

Anyone who thinks things through well in advance and weighs the pros and cons will certainly make the right decision. It should of course not be overlooked that just this investment is one of the best retirement savings and long-term very profitable.

The loan in the Investment Portfolio

Especially in times of low interest rates, investors are constantly looking for lucrative alternatives. 

Therefore, it is no wonder in the current low interest rate phase that many investors also discover loans as an investment for themselves. The borrower receives the loan and pays interest on it, which for the lender is nothing more than the return on his capital.

So far that’s not a big innovation, as funds, crowdlending platforms, and so on, do nothing but collect funds and invest in specific companies or projects.


The loan from private as an alternative

Now, funds, crowdlending, etc. have in common that many investors or investors share the risk and the individual investors bear only a fraction of the total risk. This consideration is of course correct, but also takes the individual investor the opportunity to intervene directly in the action in order to avert any adversity.

An alternative is the private loan, which is usually sufficient for a single investor to a single borrower. Although this increases the risk for the individual investor, he can compensate for this by selectively influencing the borrower.


The loan from private is freely negotiable

In contrast to funds, crowdlending, etc., the loan is freely negotiable by private individuals and is subject to almost no legal regulations. Of course, this again brings advantages and disadvantages. Funds, crowdlending, etc. are audited and monitored by BaFin, brochures must be drawn up and many conditions must be met, but of course the individual investor enjoys a degree of investor protection. If the funded project or company becomes distressed, the individual investor usually can not intervene.

Although not legally required, the private loan should of course be based on a corresponding contract. In the context of contractual freedom, certain information requirements and also the possibility of codetermination can be granted here, which considerably minimize the risk.


High risk – high profit

Ultimately, private credit is a matter of both risk appetite and return expectation. And here is the old rule of thumb, the higher the return, the higher the risk.

Investors or investors who invest in a personal loan are well advised to invest in a portfolio of various loans, maturities and returns. As a result, it is generally possible to generate a significantly higher average yield than is customary in normal capital investments.

The 7 criteria for choosing the right broker!

Ever since brokers offer their services on the Internet, trading has also become popular with retail investors. 

However, choosing the right broker depends on the trading area and the tools the trader needs to succeed!

Retail investors need traders to gain access to financial instruments traded on different exchanges. The broker trades on behalf of the Tradersund allowing him access to different markets.


Choosing the right broker

If you have decided to trade in stocks or invest in stocks, you need a broker. Although most house banks also offer this service, the conditions are usually very unfavorable for newcomers and small investors. Especially beginners are overwhelmed with choosing the right broker, so we want to introduce you to the most important selection criteria.


The European Union has developed rules for brokers to protect consumers. Among other things, these regulations are intended to ensure that client funds are always managed separately from the assets of the company. This protects the deposits of investors. So the first criterion should be the location of the broker. European brokers provide investors with more security through the strict rules.

The transfer of data

Anyone who entrusts their money and personal information to a broker on the Internet should always make sure that the transfer is safe. Secured connections must be guaranteed so that no third party can access the data. Of course, this also applies to applications for smartphones, in the event that the broker offers such apps for accessing the depot.

The customer service

Problems with the operation or questions about the different options can arise again and again. Not only beginners are then dependent on a quick response from the customer service. This service can be offered via email, live chat or phone. If you do not have a good command of English, you should pay attention to customer service in German and should be available 24 hours a day. Especially with speculative market values, such as the CFDs, fast response times are crucial. A comparison of the best CFD brokers can be found for example on the page .

The trial account

How comfortable an owner feels with the interface of the software offered by the broker and the various options often depends on personal preference. When choosing a new broker, a trial account is often the only way to get started with the software. Reputable brokers offer this possibility.

Minimum payments

To open an account, the brokers require minimum deposits. These should not exceed the possibilities of the trader. In some cases, the brokers also set the minimum trading volumes that should not be sufficient for small investors.


The fees and commissions vary considerably between brokers. Especially small investors should value on favorable offers, since the yields are also relatively small. When opening accounts, you should also pay attention to bonus programs or special opening offers, as especially beginners can benefit very well.

If you take these criteria into account when selecting the broker, then there is nothing in the way of investing in the various stock market values. We wish you good luck!

CFD Trading – What is important?

Anyone who deals with the online trading of stocks will sooner or later come across the so-called CFD trading. CFD Trading - What is important?

This particular type of trade is enjoying ever-increasing popularity. But what exactly is behind it and what risks or opportunities exist?


What are CFDs?

The abbreviation “CFD” stands for Contract for Difference, which means “contract of difference” translated into German. From a legal point of view, CFDs constitute a contract between the so-called broker – ie the provider of the various trading options – and the investor. Profits or losses arise from speculating on certain price fluctuations.

Trading takes place in real time and includes stocks, indices, bonds, commodities, interest rates and some others. After completion of such a CFD position, the price performance is based on a specific underlying. The difference is multiplied by the number of positions to calculate the gain or loss.

While trading in traditional stocks requires a very large amount of equity, CFD trading can be started at a very low cost. At the same time, contracts for difference can move much larger amounts than would be possible in “normal” stock trading. Since there are usually no large minimum deposits in CFD trading, theoretically, even with a small purse relatively large profits can be achieved.

For other trading options, this is hardly possible because, for example, trading in common stocks requires a large minimum capital. Thus, with CFD trading, up to ten times smaller amount of money is required to participate in trading, which makes it interesting for investors who are short of cash.


What risks and opportunities can be expected in CFD trading?

Trading with contracts for difference has become very popular because of the high profit opportunities. But where great profit is possible, there are usually some dangers hidden. So it is with the CFD trading: The loss of the entire capital is possible and in principle the risk calculation is very difficult, since the possible losses are relatively opaque. In addition, the losses are not limited to the previously made deposit.

Since CFDs are solely subject to price fluctuations, the losses can exceed the capital invested in unlimited amounts, without these can be determined beforehand. Any change in value on the market has a much greater impact on capital employed than trading in ordinary shares. Thus, the money of the investor, which is not intended for trading, may be affected by losses, which makes a complete risk management indispensable.

This fact leads to another risk: the liquidation of other positions. If the trader loses track of his balance and, after an unexpectedly large loss, there is not enough money to cover all the losses, it may happen that other positions are closed, even though they would still be profitable. As a result, you lose both your complete capital and the chance to make up for the losses of further CFD trades. Therefore, there should always be enough money in the trading account to absorb potential losses in CFD trading. In an emergency, only an instant loan can help.

In addition, fees for holding a position, so-called holding costs, may be incurred. These exceed in many cases clearly the possible profit, why one should consider these before opening a position always under consideration of the respective time. When holding costs arise and how high these are, can be found out about the respective platform or the broker. Basically, however, this happens at 17:00 clock to New York time.


A comparison of different brokers is worthwhile

If you are interested in CFD trading, you should think about the trading platform and compare different providers. While the market is the same for everyone, not every broker is as good as everyone else. First of all, it is essential to success in CFD trading that you are well versed in the markets you want to trade on. Therefore, care should be taken to ensure that the broker you are interested in has these markets on offer.

Another important criterion is customer service. Here, the different platforms sometimes differ the most. Especially when it comes to money, you should make sure that you can count on quick help in case of problems. Some brokers offer telephone and written support, some do not respond to customer requests.

Also in terms of fees, there are significant differences. However, one should rather keep an eye on the price-performance ratio. If a broker demands high fees, but impresses in all other respects, you can still opt for it.
Further qualitative differences can be seen on the website of the brokers. While many platforms are very well laid out, others have a very cumbersome user interface. Here everyone has to test for themselves which pages are most suitable for you.


Conclusion in CFD trading

CFD trading is a very interesting but risky way of trading. However, it may be worthwhile for investors who have little capital to take these risks, as they can already make large profits with low stakes. Important here are good risk management and a comprehensive knowledge of the traded market. Before starting with CFD trading, you should study the fundamentals of stock trading and then compare the various brokers.

Maturity Loans vs. Annuity

Do you know which financing model is more appropriate?

To help you identify which loan model suits you better, such as a bullet loan or an annuity loan , we first need to clarify how both forms work and what the pros and cons are.


Take a look at this topic and the following article or video: Top building loan interest rates – In 6 steps on favorable terms!

1. Annuity Loan

Annuity means “the rate stays the same”. With the duration of the fixed interest, your monthly effort is constant. The installment consists of an interest portion and a repayment portion. The longer mortgage lending runs, the greater your repayment installment will be within your installment, as you will only pay interest on the actual loan amount.

Advantages of the Annuity Loan :

  • fixed rate within the fixed interest rate
  • direct repayment, ie the interest burden lowers over the years and you only pay interest on the actual loan amount

Disadvantages of the annuity loan :

  • If the repayment installment is chosen to be low and the borrowing period is relatively short (eg 5, 8 or 10 years), there is an increased interest rate risk after expiry of the fixed interest rate, as a follow-up financing must be agreed for an unknown interest

2. Maturity Loan

In a maturity loan is usually an amortization replacement agreed.
This amortization replacement product may be a life insurance policy, a private pension scheme, a home savings or investment fund and will be assigned to the financing bank. At the end of the term (usually after the agreed fixed interest rate), the credit or assets saved up to that point will be used partly or completely to repay the loan.

Advantages of the term loan :

  • If the property to be financed is rented out, the result is a positive tax effect, since in total more debt interest can be expected against the rental income, which can lead to fewer tax payments
  • In the event of a suspension against a building savings account, the interest rate security of the entire financing can be increased or completely guaranteed

Disadvantages of the bullet loan :

  • no direct repayment, so that the interest is always paid on the same high loan position (this disadvantage turns into an advantage, if it is a rented property)
  • new costs may arise, eg selling and administrative costs for an insurance or closing fees for a building savings account


Whether a maturity loan or an annuity loan is the better choice depends on 2 factors:

  1. Is the property used or rented by third parties?
  2. What are your own priorities? For example, is there a need for more interest rate security?

A possible variant is also the combination of both loan types:

For example, there is the option of arranging an annuity loan and additionally voluntarily saving a building savings account. This is then not ceded to the bank as with a bullet loan , but is at your own disposal.
In this case, you calculate the remaining debt of the annuity loan and align the Bauspar sum to this amount. Even so, interest rate security can be achieved with direct eradication.

Also always check whether you can integrate state subsidies, in particular KfW 124 and KfW 153 , into the financing.

In summary, it can be said that a blanket statement, whether maturity loans or annuity loans , is not possible.


Crowdinvesting in real estate – insights and providers

In times of low interest rates and difficult to predict market developments, more and more investors are looking for promising opportunities and opportunities. 

Classic investment options such as funds, stocks or even binary options still play a role, but are expanded by other interesting options. Still quite new in the field of investment is the so-called crowdinvesting.

Here, private investors invest in a wide variety of projects or companies to enable their implementation. It is hoped for a profitable outcome of the project, which promises the investor a return on his deposit. The real estate market is also discovering crowdfunding for itself. After a detailed overview of the key data of this investment strategy, interested parties will find concrete information using the example of the supplier Exporo.


Crowdinvesting in real estate

For years, real estate has been considered a fairly secure investment opportunity . However, while investing in real estate funds can only be successful in the long term and incurs additional fees on the investor, investing in a single property is often too costly. Few investors are willing to commit much of their available capital to a single project, as diversification of the risk is also recommended by industry experts.

Even with an investment of 500 euros, private investors can participate in real estate projects.

Participating in a larger project with smaller sums is the purpose of crowdinvesting . Only by the willingness of several investors to participate in a project, the responsible persons can carry out further steps. This principle can also be applied to crowdinvesting in real estate. Here, a group of investors invests different amounts of money in real estate projects and thus enables the implementation of a construction or restoration project. If this project then comes to its conclusion, the investors receive an agreed return.

The advantages of crowdinvesting in the real estate sector are obvious compared to other investment opportunities in the real estate industry. The investor does not have to commit himself to long-term funds, renounces the high cost of an independent real estate purchase and can largely determine the amount of his invested capital himself. The fact that minimum sums in crowd investing are already around 500 euros also allows the strategy to be tested with little use of capital.


The procedure using the example of Exporo

In order to shed light on the background of crowdinvesting in the real estate sector, it is advisable to get to know a specific provider. As a result, not only the theoretical approach of the investment form is clear, but also the real market action. A good example of a crowdinvesting provider in the real estate sector is Exporo. The Hamburg-based company acts as an intermediary between developer and investor, whereby both parties can find each other via the Internet.

On the website of the provider interested parties can find after a registration currently pending projects in which can be invested. Some idea of ​​the real estate industry proves to be useful here, as the review of the synopsis and the planned measures should be done by the investor as carefully as possible. If the investor decides to invest in a project and wants to invest a certain portion of his capital, this is also done via the Exporo website. Here, the investor selects the amount of the invested sum, whereby 500 Euro are given as a minimum deposit. Exporo also allows registered investors to see in advance which conditions are linked to the respective project. The most important criteria here are:

  • running time
  • interest

If sufficient investors have been found for the project, and if it is implemented, the investor will receive his return after completion. For further information about regulation and security at Exporo , has gained detailed experience .


Opportunities and risks of crowdinvesting

The fact that crowdinvesting can also be applied to the real estate market offers not only builders certain advantages. They can operate independently of banks and their lending, making it easier to implement even more complicated projects. A clear opportunity for the investor is that the return on such crowd-investing projects is well above the values ​​of other investment strategies. The Handelsblatt writes in an article about crowd investing : “The platforms advertise with returns between 2.5 and 8 percent, in some cases may be added to profit sharing.”

After completion of the property, investors receive their return.

Decisive for the success of the plant, however, is also a transparent approach on the part of the mediator and the client. Only if the investor receives detailed information about planned real estate projects and can rely on the offered interest, crowdinvesting develops into a fairly secure investment strategy. For Exporo itself, the respective terms and conditions therefore apply as soon as the investor has decided to invest. The fact that the planning and preparation of a real estate project at the time of the Crowdinvestment are already well advanced also creates further security. Possible impassibilities on the way to the start of the project have already been eliminated at this point.

On the basis of these points it becomes clear that the probability for the success of a project in real estate crowdinvesting is quite high. Nevertheless, this should not hide the fact that the project can still be liquidated. Then it can happen that after the repayment of funds to financiers such as financial institutions, the payment of the “crowd” is no longer possible in full. It is therefore, as with many other investment strategies not recommended to choose a real estate crowdinvesting as the only investment option, but to distribute the own capital on several legs. This also optimizes risk diversification. If you want to invest in real estate, it is best to invest only enough money to get over the loss of assets.

Business knowledge for beginners: What is behind the consolidation?

The Latin term “consolidare” means about as much as “make firm” and yet it drives especially the accountants regularly the beads of sweat on the forehead. 

Business knowledge for beginners: What is behind the consolidation?

The term is the basis for the German word “consolidation”, which has different meanings in common usage, but is widely known to the general public as a term from the business community.

If different individual values ​​are combined to a total size, this is generally called consolidation. But why are annual accounts actually consolidated?


Create a harmonized overall conclusion from many individual statements

As a rule, consolidation takes place in the context of annual financial statements or interim financial statements within a financial year. In particular, this involves the correct consideration of the net assets, financial position and results of operations of a group. A group consists of various individual companies, which generally have to submit individual annual financial statements. In Germany, this may be structured either in accordance with International Financial Reporting Standards (IFRS) or the German Commercial Code (HGB). In the case of consolidation on the basis of the German Commercial Code, such is carried out on the basis of section 297 (3) HGB. How the numbers are consolidated is explained in detail in expert literature . These consolidated figures reflect the balance sheet of the Group, which in turn gives analysts an idea of ​​the economic position of the company, and in turn determines the price of shares outstanding in the international trading venues of the company’s shares. The definition at explains further significant aspects of business consolidation.


Identical evaluation basis for all degrees

A key reason for the consolidation is the obligation of the Group to inform the regulator. From the figures published, such as sales figures and profits, there are figures such as taxes payable on profits. However, since inter-group liabilities exist between the individual companies within groups of companies, consolidation is primarily used to remove intra-group relationships from accounting. In addition, individual financial statements have been prepared on a variety of bases, especially at foreign subsidiaries. Another problem in accounting in a group analysis arises, for example, when different entities of a group of companies trade with each other, for example, sell each other’s resources. Consolidation thus serves to harmonize the valuation of the business of the company. This can lead either to partial consolidation or to full consolidation. Balance sheet consolidation experts are rare and therefore in great demand in the labor market .

Consolidation thus primarily promotes greater transparency in business life and serves both internal and external target groups for a better understanding of the business activities of a group of companies.