Would you like to take out a loan with free special repayment and find out about the differences from the statutory regulations?
We provide you with all important information on the subject of “Special repayment for loans”. You will see that the right to free special repayment makes your loan more flexible than two words would suggest. Finance safely and cheaply.
Loan with free special repayment – what is it?
A loan with free special repayment stands out from the usual loan offers with repayment rules “strictly according to law”. Only the right to completely redeem existing credit early is guaranteed by law. There must always be a clause in the contracts that grants the lender a prepayment penalty. The amount of compensation – the penalty for early loan repayment – is regulated in the contract.
Frontier areas receive the prepayment penalty if they make up 1.0 percent of the remaining amount. (Valid for installment loans after October 1st, 2010). If it moves within this percentage range of the remaining amount, current case law recognizes it as compensation for loss of interest income. Only the interest recalculation of interest already received is guaranteed by the legislature. – Unless contract terms that differ positively for the consumer have been agreed upon.
Credit with free special repayment is the offer of the banking industry, beyond applicable law, to grant advantages for the borrower. The free special repayment not only includes the free loan repayment without a prepayment penalty. It would also be permitted to reduce the total debt by making small additional payments. The bottom line is that each special payment shortens the remaining term of the loan.
Loan offers with special repayment – loan models with potential
Unfortunately, many borrowers degrade the free special repayment to the additional repayment offer with the holiday or Christmas bonus. But it is precisely these special income that trade and the state are after. The state cuts a thick slice of the extra payment thanks to the tax progression. Social and cultural constraints use up the few dollars that actually remain in the wallet.
The bottom line is that there is hardly any money left to actually make additional repayments. Annual accounts and insurance policies remove the rest of the Christmas bonus from the checking account by January at the latest. Anyone who only looks at the loan with free special repayment from these points of view does not recognize the potential of the loan model. The real power lies in making the installment loan more flexible.
Repay the installment loan flexibly – choose small installments
No borrower wants to repay their loan longer than is absolutely necessary. Long terms not only mean being committed to repaying for a long time, but also a higher risk. Who can say today what the economic situation will be like in five years? In addition, the loan with small installments due to long terms and compound interest is always more expensive than with a short term.
As a countermeasure, against long payment obligations and avoidable interest costs, borrowers “sew” their installments “on edge”. If the household budget can currently afford 300 USD, then a fixed installment of 300 USD will be agreed. In order not to become a delinquent payer in the event of unemployment, additional protective measures follow. – Because, the borrower does not manage the high rate with reduced income.
Borrowers take out around 600,000 credit insurance policies annually to insure their credit. After all, it is better to pay about 10 percent of the loan amount than not to pay the installments. But the real financing costs will increase by about 10 percent of the loan amount. Instead of 30 months, for example, 33 months would have to be paid off. The approximately longer term, to pay the RSV, is accepted as a necessary evil.
Saving credit – paying back with little risk
A loan with free special repayment breaks through this Gordian knot. Financing is carried out at agreed minimum rates that remain sustainable even in the event of temporary unemployment. The RSV is therefore superfluous. From an economic point of view, it also no longer stands in the way of possible early loan repayment. More on this in the example. Let’s take the example of 300 USD in the household budget.
Thanks to the loan with free special repayment, only $ 200 liquidity is now tied up in mandatory installment payments. There is a liquidity reserve of $ 100. This money moves from the checking account to a savings account. If an ordinary sum is collected, a special repayment is made. It would also be conceivable to pay additional monthly, but only “caching” has the advantage of a liquidity buffer.
If a special repayment can be made regularly in the planned scope, the loan repayment does not take longer than with a loan with high installments. The contributions to the residual debt insurance (RSV) would also be saved without the real risk growing disproportionately.
In direct comparison to the RSV, the money buffer even creates additional security and cost savings. If, for example, a higher car repair was necessary, the overdraft facility for invoice settlement remains untouched.
Conclusion – loans with free special repayment
The option of additional repayments free of charge turns the inflexible installment loan into a significantly more adaptable loan model. Agreeing on small installments does not automatically lead to higher financing costs due to compound interest or additional credit risks if the contract is long.
But on the contrary. The expensive RSV would be waived responsibly. At the same time, the loan with free special repayments enables real repayments to be based on the current circumstances. The bottom line is, with comparable risk and term, financed cheaper.