If you stroll past the windows and expenses of the banks, it is hard to believe in places at what low interest rates you can borrow money today. With interest of 3 – 4% even for amounts up to 10,000 USD – and without having to provide collateral – even larger purchases are still easy to finance and pay.
Shop window conditions and low interest rates
If you have made an appointment with the bank to negotiate a possible loan, these shop window conditions and low interest rates usually no longer exist – you would still have a mortgage open, the car has not yet been paid off, and the new employment relationship is firm and unlimited, but it has only been in existence for 12 months. All in all: the credit rating is good, but could be better – and the interest rate rises by a few percent.
If you do not immediately say yes, you can already save here, because a high front-end load, which is usually over 1% of the loan amount, as well as processing fees of 3 – 4% of the loan amount are not the possible lower limit, but rather a maximum customary in the industry, which is usually associated with the worse Creditworthiness is established – in addition to the higher borrowing rate. If you negotiate hard, a surcharge of 1% and processing fees of 1 – 2% are quite realistic with a good credit rating, you can save a lot on costs that only make the loan unnecessarily expensive.
As soon as everything is dry and the effective interest rate is barely more than 5 – 6%, even with amounts of 8,000 to 10,000 USD, you might think that the contract is ready for signature. At this point, however, there is often a hint that taking out residual debt insurance would be advisable – after all, no one in the current situation knows what it will look like in 2, 3 years and then of course you would like to be reluctant to have debts in the case of unemployment or even debts the family in the event of a sudden death.
In order to minimize this risk and be on the safe side, it is advisable to take out residual debt insurance, of course directly from the bank – and it hardly costs any more per month: 20 – 30 for significantly more security and the effective interest rate remains the same !
Expensive extras that do not represent protection!
If the residual debt insurance were as good as it is advertised, there would basically be nothing against it. It is problematic, however, that this often only provides limited protection and then only in special cases, and above all: it is expensive and drives the credit costs to unprecedented levels. The actual costs (apportioned to the interest) are not visible to the customer – and do not have to be disclosed.
Because: A residual debt insurance is a voluntary, optional additional service – and this does not have to be included in the effective interest. If you included 20 – 30 USD per month in the ancillary credit costs, as well as the processing fees and the front-end load, a favorable interest rate of 5 – 6% would quickly climb to over 12 – 15%, with higher interest rates you can also easily and happily crack the “cheap” loan the 20 percent mark! Of course, hardly anyone would want to take out loans with such low interest rates!
Never sign immediately!
Therefore, the following always applies: Before signing, you should always take the loan agreement home with you to sleep another night or to present it to a consumer advice center and get a second expert opinion on a specific case. It is not for nothing that residual debt insurance is the most expensive main factor that is most likely to be examined.
A signature should always be refused, no matter how dicey the situation or what the interest rate looks like, if the bank is not willing to give the contract, the total cost, including optional costs such as those for residual debt insurance in the effective ones, on request Calculate interest or even waive residual debt insurance. The latter in particular indicates that the bank is not interested in arranging a cheap loan, but only in selling one of the most expensive risk insurance policies!
Tip: Taking out life insurance or disability insurance as an alternative is usually much cheaper than residual debt insurance and both a larger range of liability and the total amount of liability can be agreed.
Contract is signed – what now?
Once the contract has been signed, it can hardly be objected to unless the ancillary credit costs exceed the usual level by more than 100%, since the contract and the conditions could otherwise be classified as immoral (usury), which in the end mostly only can be clarified in court.
If you have made the signature, it is still not every evening, because at least the additional policy in the form of the residual debt insurance can be revoked up to 30 days after the signature. Even if the bank did not want to grant a loan beforehand without taking out residual debt insurance, it can no longer withdraw it.
However, if you only want to cancel the residual debt insurance after 30 days, it is more difficult: complete cancellation is not possible, except in the event of a general contestation of the contract due to immorality – however, the contract can still be partially dissolved, e.g. B. if various facts have been secured. For example, the most expensive thing in “all-round carefree insurance” is unemployment insurance: even separating this cost item can mean significant savings.