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Loan for pensioners

Are there loans for retirees?

Are there loans for retirees?

Life could be so simple: Finally, work no longer calls every day and there would be enough time to discover the world and pursue your beloved hobbies. But often enough there is a lack of financial means to fulfill a long-awaited wish. Unfortunately, many banks here are not exactly cooperative and refuse to give pensioners a loan. They have the problem that they have many wishes but are not financed.

Loans for pensioners are completely excluded from many banks, which is justified by the higher risk of death. Every bank wants to get back the money they have lent and sees the risk that older people will no longer be able to make the repayment.

On the other hand, the demographic development of society is quite clear. People are getting older! In theory, you would also have more time to repay loans. Some banks are already rethinking this, others may take some time.

Are you a pensioner and want a loan? We check every single case!

Why are pensioners less likely to get a loan?

Why are pensioners less likely to get a loan?

People are getting older – the time factor no longer plays a role in repaying a loan. However, statutory pensions are getting lower, which in turn means that less money is available for repayment each month.

Banks also justify their refusal to grant loans to pensioners because older people are at greater risk of illness and death. This could lead to personal bankruptcy if the borrower becomes ill or even in need of care. Every bank will be careful here, because they want their loaned funds to be repaid.

A residual debt insurance could help because it covers the risk of default in the event of death or illness. Loans for pensioners are still refused by many banks. Others in turn demand significantly higher interest rates or set the monthly installments so high that the loan term can be kept very short. Generally, retirees get worse terms if they get a loan at all.
Here are the most common reasons for refusing a loan for pensioners:

  • higher risk of death and illness
  • possible personal bankruptcy due to excessive costs
  • Insufficient pension payments
  • no guarantors available

At the same time, once again an overview of the consequences that can arise when granting credit – of course all negative for the pensioner:

  • worse conditions, especially with regard to the interest rate
  • short terms for the loan
  • expensive installments for residual debt insurance
  • Granting only small amounts of credit

How is the loan approved?

A positive Credit Bureau information is always helpful for lending. If you are not sure as a loan applicant here, you should request information in advance and have any incorrect entries deleted or changed. Banks are more satisfied with a “clean” Credit Bureau and are more responsive to the requests of the applicants.
Regular pension income should also be available. It does not matter whether they come from statutory or private pension insurance. At least 1,000 USD should flow into the account per month. Important: Every pensioner can increase his chances of getting a loan here if he ensures that after deducting all costs there is still enough money left for the loan installments.
In addition, a pensioner should be able to offer additional collateral. These can be taught in the form of real estate or by guarantors.
At this point, an overview of some options that can have a positive impact on lending:

  • positive Credit Bureau information
  • regular income from statutory or private pension insurance
  • possibly further income
  • collateral
  • guarantee
  • Credit default insurance

If the loan is applied for, various documents must be submitted. These include, for example, the pension notification and other documents that can serve as proof of income. In addition, there can already be a declaration by a guarantor who would be liable for the loan. In addition, the willingness to take out credit default or residual debt insurance can be signaled.

Which banks are eligible?

Which banks are eligible?

First of all, the house bank is certainly the number one contact point when it comes to applying for a loan. However, as in many other cases, this is not necessarily the best contact because the conditions are often less good. It is therefore worthwhile to use offers from other banks. An online bank, for example, can offer significantly better conditions.
At this point, we would like to point out the possibility of a personal loan, which can be granted, for example, by various internet banks. The loan project and the person of the potential borrower can be presented here. In the best case, there are then several investors who jointly provide the loan.
A loan may also be available to friends, which in turn has the advantage that only low interest is often payable – if at all. On the other hand, acquaintances and relatives are cautious when an older person requests a high loan.

Are you a pensioner and want a loan? We check every single case!

What needs to be considered when applying for a loan?

What needs to be considered when applying for a loan?

The loan application must of course be completed in full. First of all, this includes personal and address data. Information on statutory or private pension insurance is also requested, along with the relevant evidence.
Since the banks also want to know which monthly charges the borrower has to bear, proof of rent payments, additional costs and other expenses, such as for insurance, must be provided.
If other loans are serviced, they must also be listed. They should be mentioned in the amount of the monthly charge and should not burden the existing capital too much.
Is there any income? Then they must also be mentioned, because they increase the credit rating. Real estate can also be mentioned here – these offer a certain level of security if they are owned by the loan applicant as residential property.

Of course, it is also important: Does the loan have to be taken out at all? Or is it enough to save a few months and then fulfill your wish? For example, when it comes to traveling, retirees are significantly more flexible. You are no longer tied to company vacation times and can therefore simply travel a few weeks later. However, other requests often have less time and must be fulfilled directly. Even a pensioner cannot avoid taking out a loan here.

Here are some tips on how the creditworthiness of pensioners can be positively influenced:

  • Choose short terms of up to three years.
  • Agree on low loan amounts.
  • Positive Credit Bureau entry and regular repayment of further loans.
  • Taking out residual debt insurance.
  • Application with two borrowers – ideally together with the spouse.
  • The regular income clearly exceeds the expenditure.

Many banks rely on collateral and would like the property to be transferred as security. Such a loan comes into question if, for example, a new car is to be bought. The so-called non-cash reference is important here. If real estate is available, it can also be used as security. It also makes sense to leave the amount of a mortgage that is entered in the land register there. This has the advantage that there is security about the property again when the loan is granted again. However, the prerequisite is that the new loan is then taken out from the bank in whose favor the mortgage exists.
Otherwise, pensioners only need to ask a bank for a loan and not be afraid of the risk of using an online bank or its offer. These banks in particular often offer the best conditions because they do good business themselves. They are often much more accommodating to pensioners than many branch banks.

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Debt restructuring for home loans

Debt restructuring – what does that mean?

Debt restructuring - what does that mean?

If you reschedule a loan, it means that you terminate the previous loan prematurely and take out a new one. The main reason for this approach is that customers expect better terms from the new loan.

Debt rescheduling is particularly useful if the new loan brings lower interest rates. This can be the case when the general interest rate level has dropped. However, there are also personal living circumstances that make it possible to get a cheaper loan. This is the case, for example, if your salary has increased so that you can now boast a higher credit rating. Even if there was a negative Credit Bureau entry at the time of building the house, which has since been deleted, this can result in you receiving a cheaper interest rate.

Benefit from low interest rates

Debt restructuring is currently more topical than ever. This is because interest rates are at historically low levels. Not only people who take out a new loan can benefit from this. Even people who have already received this can get a cheaper loan through debt restructuring.

The reason for the low interest rates lies in the monetary policy of the Best Bank. It seeks to boost the economy by increasing the amount of money in circulation. One way to do this is to lend cheap loans to banks.

Not only do banks and business customers benefit from this – private individuals also receive extremely cheap loans in this way. Therefore, it is very important for everyone who is currently repaying a loan to review the old contracts and compare them with new alternatives. The savings can be substantial.

The following calculation example shows how great the potential savings are. For example, if you took out a loan of $ 100,000 over a ten-year term with full repayment and an interest rate of 4 percent, you will have to pay a total of around $ 23,000 in interest. If an interest rate of 2.5 percent is now possible due to the low interest rates, the rates are otherwise only around 14,000 USD under the same conditions.

This calculation clearly shows that even with a relatively small loan amount for a house purchase, the saving potential is around 9,000 USD. If you have taken out a higher loan, you can save a lot more money. In addition, in many cases the difference between the current interest rate and the interest rate after debt restructuring is significantly higher than in our calculation example. This also provides even more opportunities to save money.

Note the prepayment penalty

Note the prepayment penalty

The previous chapter described how high the savings potential is even if the interest rate is lowered slightly. Although this option seems very tempting, it is important to carefully review the terms of the old contract. In this case, banks almost always demand prepayment penalty.

In your original loan agreement, you agreed with the bank that your loan would be valid for a certain period. If you cancel this now, the bank will lose the business due to the interest accruing. For this reason, it collects the prepayment penalty, which is to be considered as compensation for the lost profit.

The amount of the prepayment penalty can vary from case to case. This depends primarily on the individual agreements that can be found in your loan agreement. The amount of the remaining loan and the remaining term are also important. It is therefore advisable to read the contract carefully first and to contact the bank or, if necessary, a lawyer if anything is unclear.

Legislators have created favorable conditions for loans with very long terms. If you took out the loan more than ten years ago, there may be an extraordinary right of termination without incurring early repayment penalty. In this case too, it may make sense to contact the bank directly or, if necessary, a lawyer.

The forward loan as an alternative to classic debt restructuring

The forward loan as an alternative to classic debt restructuring

If you want to benefit from the currently low interest rates, but do not want to terminate the loan contract prematurely due to high compensation, there is another option. This is called the forward loan.

You are already entering into a loan contract for the date on which your current contract expires. In doing so, the bank undertakes to grant you an interest rate that is already being set and which is roughly the current level.

However, the interest rate is usually slightly higher than for a loan that you take out immediately. However, this rate remains valid even if the interest rate should rise in the meantime. Therefore, you should only conclude such a contract if you assume that interest will rise significantly by the end of your contract.

This variant has the disadvantage that you still have to pay the high interest of your previous contract until the end of the term. In addition, the interest rate level is slightly higher than with an ordinary loan. However, you do not have to pay a prepayment penalty this way. This alternative is therefore particularly suitable for loans for which a very high value has been agreed.

When is debt restructuring worthwhile?

When is debt restructuring worthwhile?

The most important question for all people who have to pay off a loan is certainly whether the debt restructuring is worthwhile for them personally. It should be clearly stated that this is not always the case. It is therefore important to always examine the individual case and answer this question individually.

First of all, it is important to check the terms of the previous contract. On the one hand, you have to consider how high the interest you have to pay with your previous contract. If you have difficulties with the calculation, an interest calculator on the Internet can also help you.

On the other hand, you have to take from your previous contract how much the prepayment penalty would be. If you have problems understanding the difficult wording of the contract or performing the corresponding calculations, it makes sense to make an appointment with your bank to clarify these questions.

In the last step you have to calculate how high the interest would be on a new loan. For this, it is necessary to obtain corresponding offers from the banks. A credit comparison can also be helpful.

When you have finally determined these values, you have to compare whether the interest on the new loan plus the prepayment penalty is cheaper than the interest on the old loan. If this is the case, the debt restructuring is worthwhile for you.

Debt restructuring step by step

Debt restructuring step by step

At the end of the article, a small guide is now to be presented, which presents all the necessary steps for debt restructuring.

  1. Find out about the current loan offers. You can use comparison computers on the Internet, for example, which offer a lot of helpful information. If you find an interesting loan, you can get a specific offer. This way you can see early on whether you meet all the necessary conditions for the new loan.
  2. Find out about the amount of the prepayment penalty. You can find this in your loan agreement or inquire with a consultant at your bank.
  3. Calculate the difference between the interest on your previous contract and the cost of the new option plus the prepayment penalty incurred. It is only sensible to continue with the further steps if this calculation shows potential for savings.
  4. Also take into account all other conditions of the new contract. With regard to the possibility of special repayments, for example, these should be at least as good as with your previous loan.
  5. If you have decided to reschedule the debt, you must first conclude the follow-up financing contract and then terminate your existing contract.
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Forward loan – terms and interest in comparison

Forward loans are not actually a type of loan, but rather a so-called financing offer from the banks. Since a forward loan is concluded today for the future, it gives a borrower the opportunity to secure this interest in the future even before the current loan expires. With this protection, the borrower does not risk that the interest charge increases after the fixed interest period. The borrower is already concluding a loan contract with a fixed interest rate, which will replace his old loan after the fixed interest period expires. In addition, a forward loan can only be applied for if the mortgage lender already has a mortgage loan that will be available for follow-up financing in a few months. On the other hand, an application is not possible if the mortgage lender only decides to buy a property in a few years and wants to secure the favorable entry interest rate today.

How does a forward loan work?

How does a forward loan work?

The way a forward loan works is almost the same as that of an annuity loan, with the only difference that a loan contract is already concluded today, but it will only be called up in the future. As a result, the forward loan seamlessly connects to the existing loan as follow-up financing. The interest rate of the forward loan is calculated on the one hand from the nominal interest rate of the current loan. This is then added to the monthly remaining term of the current loan. There is also a pre-determined surcharge. How far a customer can agree on the new interest rate to expire varies from bank to bank.

The payment of the monthly installment for the forward loan begins when it is paid out, and commitment interest usually accrues for the time until it is paid out. Currently 0.015 to 0.045 percentage points per month are common (as of 03.2011). The fixed interest rate for a forward loan is between five and twenty years and can be completed 12 to 60 months in advance. The longer it takes for the borrower to take out his loan, the higher his monthly borrowing rate will be. Example:

  • Forward loan as follow-up financing, fixed interest period 10 years
  • Closing takes place three years before the follow-up financing is due
  • Assume that the borrowing rate is 4.95 percent and the interest premium is 0.01 percent. In this case, the borrower pays 5.31 percent interest on his loan over 10 years (4.95% + 0.36%)

Mortgage lenders who use a forward loan then only have to pay the fees for the transfer of the land charge. Overall, forward loans are particularly suitable for all those whose fixed interest rates will expire in the next 1 to 5 years. With the forward loan, borrowers then secure their current interest rate. But be careful: this calculation only works if the interest rates actually rise in the future. If, on the other hand, interest rates remain the same or even go down, in the worst case there will be negative business. The mortgage lender bears a certain risk, because on the one hand the person who concludes a forward loan has to accept it later, on the other hand nobody can predict the development of future interest rates today. The loan must therefore be accepted even in the event that interest rates are already clearly falling again in the meantime.

Of course, the borrower has the option to cancel the forward loan (but this is not possible with all banks!), But in return a corresponding prepayment penalty will apply. Prospective buyers should therefore use so-called “short-term cancellable forward loans” in uncertain times. In this case, the borrower then has the option of terminating the forward loan, for example, until the end of the next quarter against a corresponding interest premium. At the same time, he now has the opportunity to switch to a cheaper loan – and without any prepayment penalty. A forward loan that can be terminated at short notice therefore offers the mortgage lender a significantly lower risk.

Compare and calculate conditions for forward loans

Compare and calculate conditions for forward loans

You can use our calculator to determine which interest rates banks and brokers currently offer for forward loans with specific lead times:

Debt restructuring options by the borrower

More and more builders and homeowners are using a forward loan as a follow-up annuity loan. Anyone who receives such a debt rescheduling option through their lending bank should definitely compare and not accept every offer without asking. Often, a corresponding bank change can save several thousand USD. Most funding institutions also offer corresponding forward loan financial calculators on the Internet, for example on the Internet platform. The surcharges can also be calculated accordingly, because the shorter the lead time, the lower they are. The higher the premiums for a forward loan, the greater the indication that interest rates will rise in the coming months or years. The loan amount of the new contract corresponds to the remaining debt of the old loan on its expiry date.

Borrowers should bear in mind each time they use a forward loan that the respective employees of the financial institutions almost always assume that interest rates will rise. On the one hand, these are only assumptions, on the other hand, this is also justified by the fact that energy prices are also constantly rising, accompanied by rising inflation. However, these assumptions are not factual. Rather, the average interest rate over the past 10 years should be used as a benchmark, and this was around 6.5 percent. This shows whether the mortgage rate corresponds to a low or a high rate phase. This shows that there may well be excellent consultants with excellent specialist knowledge in the mortgage lending business, but unfortunately none of them has a crystal ball, which would ultimately not be useful.

So if you want to calculate an exact real estate financing, you need different factors and aspects, which should be divided into several steps if possible. Because every step in turn has a corresponding impact on overall financing. At the beginning, therefore, there must be the determination of the debt. So the borrower needs to know what his real estate loan is. This first step has a huge impact on all others, because it shows the amount of equity accordingly. The more of this there is, the lower the need for outside capital. The calculation:

After this first step, the loan forms that can be financed are determined in a second. In addition to a home loan, this can also be a mortgage loan. The monthly rate is then determined on the basis of the loan amount and the respective interest rate, which then represents the total charge. The borrower must then bear this monthly for a longer period. Example:

If the loans listed in the example expire, the forward loan takes effect. The benefits are even greater if government subsidies such as child benefit have expired in the past and these revenues, which are no longer available, have led to a contribution burden on the property. The ongoing increases in energy prices such as gas and electricity have also made themselves felt in recent years, and these additional costs are also increasing the budget considerably. If, in addition to the cosmetic repairs, there is also a new heating system, it quickly becomes financially tight. Anyone who still has money left for their studying children – probably that. The financial consideration in the form of a forward loan is now that this game of increasing the monthly mortgage rate does not continue “indefinitely”. In this context, the mortgage lender should also be clear about keeping his property in his portfolio until the forward loan expires, in order to avoid possible prepayment penalty.

With a forward loan, however, the property owner and borrower do not buy the right to follow-up financing at a predetermined interest rate, which can expire if one is no longer required! Rather, the borrower enters into a specific loan relationship with his financing bank, the effectiveness of which begins after 14 days (statutory cancellation period). Termination is only possible in certain cases, e.g. when the property is sold.

If you are not sure about the conclusion of a forward loan, you still have the option to secure the exit option in addition to securing the future. This is done through a large number of follow-up loans on the market with the right to terminate. Another option is the so-called cap credit. This is a loan with variable interest rates and a fixed interest rate cap (the cap). The borrower also benefits from interest rate cuts by linking to money market rates during the year. At the same time, the risk of an interest rate hike can be limited by a guaranteed maximum interest rate.

However, a security premium is due for the assurance of the upper interest rate limit. But the Lite Lender is particularly characterized by its flexibility in terms of repayment, making the loan business more calculable for the borrower.

Rescheduling Alternatives

Alternative 1: There is a possibility of rescheduling when the loan expires and the lender can also be changed without any problems. After applying for a loan from the new lender, the mortgage is assigned by the old lender. The assignment takes place between the banks, the borrower should only plan a processing period of four to six weeks. In most cases, the new bank also evaluates the property free of charge.

Alternative 2 : If a loan has a total term (fixed interest period) of 15 years, of which 10 years have already expired, a debt rescheduling can be carried out in the event that the market has a correspondingly low interest rate at that time. This is the case law in favor of the borrower, who is basically entitled to repay his loan in whole or in part after 10 years (section 489 (1) no.3 BGH). The borrower only has to give 6 months’ notice to cancel their loan with the existing bank.

Alternative 3: Many borrowers do not want to wait until the end of their fixed interest rate with a debt rescheduling and therefore choose the option of a forward loan in order to avoid the risk of rising interest rates. However, this option only applies to loans with fixed interest rates that expire in a maximum of three years. Clarification is also necessary, because not every bank that provides credit is willing to do so. In the event of a redemption at the old bank, an offer from another bank is now required. In order to make a financing decision at the new bank, the borrower must bring all property documents.

Alternative 4: Borrowers can make early debt rescheduling within an existing loan. However, the approval of the financing bank is required for this. Not all banks agree to early loan termination here – they are not even obliged to do so! If the bank declares its consent, the borrower has the right to cancel his loan within a period of 6 months. If the loan is terminated prematurely, banks have the option of claiming a prepayment penalty with an additional surcharge of up to 100 percent according to current BGH case law. Costs between 5 and 10 percent calculated on the total loan amount quickly accrue here.

Borrowers have many options, as the various examples show. Ultimately, however, everyone has to decide in their own individual way.

The subordinated forward loan

Anyone applying for a forward loan usually has to secure their loan with a first-rate land charge. If the borrower already has a land charge entry, this can be assigned to the new bank from the old bank. This in turn is associated with significantly lower costs for the borrower. This loan from the new bank must now also be secured in the form of a senior land charge in the land register. However, an exception can be made. Because in many cases follow-up financing is desired at a time when there is already older financing for the same financing object.

Example: A family financed their former condominium worth 120,000 USD through two loans: the first loan of 100,000 USD had a borrowing rate of 10 years, the second loan of 20,000 USD a borrowing rate of 5 years. In the end, the loan of 20,000 USD should be repaid entirely from own funds. For this reason, this combination was chosen in our example. However, due to major restructuring measures, these own funds were no longer available. It was therefore decided to secure this share of the financing with a forward loan. If the family does not receive a correspondingly attractive offer for follow-up financing from the current financing bank, they can either redeem the corresponding loan or reschedule to another bank, but the current financing bank remains a senior creditor in the land register.

Although the family only wants to finance the small part in the amount of 20,000 USD, the new bank that carries out this follow-up financing will always stand behind the primary land charge. This in turn brings with it the problem that the family will not find a financing provider at all for this constellation. This problem can be avoided with a subordinated forward loan.

The loan-to-value loan

A loan-to-value ratio is to be understood as the percentage that falls under the external financing. And it also represents the long-term achievable sales price of the property to be financed. The bank estimates between 70 and 90 percent of the actual purchase price. This serves as risk protection for the bank in the event that the borrower no longer meets his monthly obligations. The mortgage lending value thus serves the long-term risk assessment by the lender (so-called mortgage lending limit).

Within the mortgage lending value, a distinction must be made between owner-occupied property and rented property. If you own your own home, the mortgage lending value is based on the real value of the property (land value, building value). In the case of rented properties, on the other hand, the mortgage lending value is based on the estimated income through permanently achievable income. In order to be able to counter any fluctuations in the interest rate market, the credit institutions levy a security discount, which can be between 10 and 20 percent. The loan-to-value ratio thus reflects the relationship between the nominal amount and the loan value.

In order to determine the mortgage lending value of a property, this can be calculated in advance by each property owner himself under 1.3.1. For the bank, however, an appraisal by an independent building expert is required. In this way, interested parties can influence the conditions that the banks offer their customers for real estate financing in advance. Only those who correctly assess the value of their property will receive a correspondingly low building rate. So if you want to save a lot of money for your financial structuring, you should plan the loan expiration accordingly in your financing in addition to your early calculation. Example:

This example makes it clear that prospective buyers of forward loans should always make sure that the bank takes into account any mortgage loan deductions. An optimal comparison therefore always takes place under identical conditions by specifying the loan amount and the market value of the bank to be financed. The result of the banks in this calculation then always includes all customary bank surcharges and discounts that arise depending on the loan amount. However, if the market value is calculated by the banks, it rarely turns out to be identical for all. However, a different market value again has an impact on the interest condition, which can be significant.

New standard in property valuation

The value of a property depends on many factors. Not only the experience of the expert counts for the evaluation, but also constant market and economic observations. Therefore, experts do not rate real estate as a statistical system, but as a dynamic economic asset, the value of which is determined not least by private, economic and social events.

How to calculate the value of a house

With the market-oriented valuation of a house or a condominium, the sales success depends on and fails here with many. Buyers and sellers have to be clear about what their house is really worth and have to be aware: Even if it hurts at first, the value of an object is always exactly where supply and demand meet. For example, it is conceivable that a house or condominium in the same district could easily cost 15,000 USD more or less; This is despite the fact that both houses are equivalent in size and equipment – but they can differ in their surroundings. These criteria, which can have a significant impact on the price, are, for example, south-facing / north-facing, residential street / thoroughfare or a clear view or a view of the upstream buildings.

Another aspect is the evaluation of the offers. The purchase price, living space, plot size, construction method, features (i.e. basement and attic expansion for houses or the number of residential units in a property for condominiums), garages or parking space and, last but not least, the assessment of the direct location are of enormous importance. Not to forget that the most important thing when selling real estate is the location and always the location. Remember that a beautiful carpet, the new wallpaper on the wall or the hobby room that you have painstakingly expanded are generally not decisive for the purchase.

Therefore, prepare yourself for the visit and the sales talk in peace. When opening the conversation, it is important whether the contact is the first to get to know or a follow-up appointment. Therefore, come to the facts right after the opening of the conversation. Give the prospect all the information he wants; do not try to gloss over clear facts or even cover them up. The slightest insincerity that the buyer notices can end the sales pitch.

You can use the following questionnaire to calculate your house or apartment with certainty. Enter your points, you can also use intermediate values, but do not give any minus points.

The alternatives to the forward loan

The alternatives to the forward loan

There are only a few fully-fledged alternatives to forward loans. If you want to hedge against rising mortgage interest rates, you can also achieve this with interest rate derivatives. But this alternative is far too speculative for real estate financing. On the one hand, the value can be multiplied, but in reverse, the entire system can also become worthless. This type of protection is also quite expensive. But even the conclusion of a building society savings contract is not a real alternative, because if you wanted to secure at least 50 percent of the remaining debt of 120,000 USD in 3 years, for example, you could only achieve this through a building society contract worth 60,000 USD. The monthly contribution required for this, which would be between 800 and 1,200 USD, would no longer be sustainable for most.

An alternative would be the option of a special repayment within an ongoing financing. In this way, the current repayment at the time of follow-up financing could be drastically reduced. Another alternative to the forward loan would be to immediately repay the loan by repaying the loan through new financing. If, however, at least ten years of the fixed interest period have not yet expired, the banks only have to agree to immediate termination in exceptional cases, such as when the property is sold. Interest savings can also be made with a savings plan. However, most savings plans that are used to save capital for real estate financing are based on investment funds. However, the average expected performance is an annual percentage between six and ten percent.

But here too, the higher the expected return on a fund, the higher the risk. In the worst case, the entire stake can be lost, even if total losses are uncommon for non-leveraged investment funds. However, a price drop of over 50 percent in a year is realistic and must be taken into account. It is therefore by no means certain that the desired capital will actually be available when it is needed. A high risk for every mortgage lender.

Secure low building rates now up to 60 months in advance

If you want to secure low interest rates for your follow-up financing now, you can request a free financing offer from our partner, Interhyp AG.

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Loan despite Credit Bureau

Negative Credit Bureau credit with domestic financial institutions

Negative Credit Bureau credit with domestic financial institutions

If you want to take out a negative Credit Bureau loan from domestic financial institutions, first make sure which bank makes the corresponding offer. In some cases, you can already see from a bank’s homepage whether a loan application with a negative characteristic makes sense. Valuable information on this is also provided by experience reports posted on consumer platforms.

If a bank offers you a loan despite a negative Credit Bureau information, it usually requires that there is only one soft negative characteristic. You also have good chances of getting a loan from your house bank, provided that your Credit Bureau negative characteristic is not based on a financial contract concluded with them. For existing customers, banks also assess reliability based on their own experience, so that a good internal credit rating can offset a soft negative entry.

Another borrower or a guarantor for a loan

Another borrower or a guarantor for a loan

You can also provide another borrower or a guarantor for a loan with a negative Credit Bureau. The fact that many financial institutions prefer to jointly apply for a guarantee is due to the current case law. According to this, banks not only have to obtain information from guarantors about their economic performance, but also about their sufficient knowledge of the possible consequences of a guarantee declaration. Thus, unlike a joint application for a loan, there is a risk that a court will later declare it ineffective. The co-applicant does not have to be related to you or live in your household. However, it should

  • to have a permanent job
  • achieve a regular and sufficiently high income
  • have a Credit Bureau without any negative entry

The path through a credit intermediary to receive a loan with a negative Credit Bureau is generally useful. The service provider achieves better conditions and more generous lending than a consumer who directly applies for the loan, simply because of the large demand bundled with him. However, make sure that the agent only charges you a reasonable success commission and no upfront costs. This is the only way to ensure that you hire a truly reputable credit broker who, like you, is also interested in the success of the brokerage efforts, otherwise he will not make any money.

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Combi loans for mortgage lending – advantages in comparison.

A combined loan is a loan composed of two types of credit, in which a fixed-interest loan (annuity loan) is combined with a variable loan. Combined loans are also known as partially variable loans. Especially when it comes to mortgage lending, many developers want to benefit from the currently low interest rates on the interest rate market. At the same time, however, there is also a desire for the option of a special repayment. Special repayments are often associated with interest premiums, which the lenders demand on the long-term conditions. On the other hand, the builders enjoy a free special repayment right in this way.

Determine interest

Determine interest

The fixed interest rate for the variable loan is always 3 months, after which the interest is automatically adjusted again. As a result, the interest rate can of course not only decrease, but also increase. In contrast, the long-term loan is subject to fixed interest rates of between 5 and 25 years. In the case of a variable loan, the borrower has the option of either repaying it at the end of each month or only partially. Even with a fixed annuity loan, it is possible to provide this with special repayment options. Specifically, this means that with this financing variant, on the one hand, the attractive conditions can be used, on the other hand, high special repayment options are available. If a contract then becomes due or an inheritance is pending, money can easily be invested in debt reduction.

Unfortunately, most builders or apartment and house buyers are not familiar with the “combi loan” financing option at all, because most banks do not tend to offer their customers this alternative of home financing. The problem is the higher need for advice.

How Compound Loans Work

How Compound Loans Work

So far, builders and home buyers have been required to rigidly pay off their classic annuity loan until the end. Nowadays, fierce competition between banks is increasingly producing individual and flexible offers in real estate financing. Those who have good credit ratings or sufficient collateral are increasingly being able to negotiate special repayments and different interest rate adjustment periods with banks. This usually goes so far that customers can largely determine their repayment freely. It is also possible to combine different mortgage lending models with one another today.

Nowadays, special repayments should always be part of his financing for any builder if he wants to shorten the path to debt free. So if you are looking for the planning security of an annuity loan and want to combine it with a variable loan, you are opting for a combination loan. For all other usual types of mortgage loans, banks in most cases require corresponding interest premiums for a special repayment. In many cases, the amount that is also to be contributed to construction finance is also limited. These cost-intensive disadvantages can be largely avoided with a combination loan. Because the unscheduled deposits by the borrower not only reduce the loan amount, it also helps to save interest costs at the same time.

The amount of the flexible portion within a combo loan and the amount of the fixed interest rate depends on the borrower as well as the provider. from. Example: A real estate financer needs a loan of 200,000 USD for his property. To do this, he chooses a combination of a fixed-interest loan with a loan amount of USD 100,000 with a 10-year fixed interest rate and a variable loan in the amount of the remaining USD 100,000. This advantageous mix makes combined loans particularly suitable for all those borrowers who, in addition to interest rate security, also want enough flexibility in their repayment when financing their real estate.

The long-term annuity loan is also an alternative to the combi loan. This also offers the borrower a corresponding flexibility, since this loan can be repaid completely and free of charge at any time from the 3rd year. However, in the case of annuity loans, special repayments must be agreed with the respective credit institution.

The advantages and disadvantages of combination loans

The advantages and disadvantages of combination loans

The advantages of the combi loan lie in particular in its flexibility, because unlike the usual special repayment options, the borrower has a three-month special repayment option. At the same time, he takes full advantage of the interest rate reduction measures implemented by the LLB, combined with the possibility of converting into a longer-term borrowing rate at any time should the interest rate rise sharply again.

If the market shows falling building rates, real estate financiers with a variable loan have the opportunity to benefit directly from the interest rate cuts. Another advantage is the up to 100 percent special repayment option of the variable loan tranche. In this way, loan costs of several thousand USD can be saved. The disadvantage always results in rising interest rates, because the rate of the variable loan tranche becomes more expensive here.

An additional advantage of the combi loan is the fact that most lending banks do not include the variable portion in the loan. As a result, the interest rate for the long-term loan is reduced accordingly. However, one should not lose sight of the interest rate trend. Because if interest rates rise quickly, there is a risk that the variable portion of the loan will become more expensive. Therefore, it can quickly happen that the interest rates on the variable loan are higher than the interest rate on the annuity loan. If this happens, the borrower should quickly convert the variable portion of their loan into a fixed rate loan.

Who are combo loans suitable for?

Who are combo loans suitable for?

Combi loans are particularly suitable for borrowers who expect additional income over a short to medium-term period. This target group benefits from the variable loan tranche as well as all those who can look forward to a (rising) rising salary in the future. This can be achieved on the one hand by a promotion or on the other hand by taking more profits as a self-employed person. In all of these cases, borrowers now have the option of repaying their variable loan portion within the credit line even faster. This mixed form is also suitable for borrowers who speculate on falling mortgage rates in the medium term. To this end, borrowers should, however, be prepared to keep a close eye on the development of building rates every month.

A combination loan is also suitable for all those who want to make high special payments after the sale of an old property, for example. The same applies to those who benefit from a high depot resolution. In the case of a combination loan, the borrower must always be required to observe the interest rate development accordingly, so that the variable portion of the loan does not become extremely expensive.

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Promotional loan for a doctorate

The acquisition of a doctorate is considered a doctorate. In most cases, this is followed by a degree, some universities also continue to offer undergraduate doctoral studies for selected courses.

Are student loans also valid for a doctorate?

Are student loans also valid for a doctorate?

Whether a student loan is also suitable as a loan for a doctorate depends on the award criteria of the respective credit institution. Many banks require a first degree to grant their loans to students, so that they only promote a doctorate if it is an undergraduate degree. Cream Bank, as a nationwide promotional bank, also gives its student loan for a doctorate, provided the applicant has not already received a loan for fourteen semesters. The maximum amount for Cream Bank credit for doctoral studies is 650 dollars per month, so most doctoral students need another source of income.

The advantage of a promotional loan for a doctorate is that repayment only begins after you have earned your doctorate. In addition, like most other banks that pay student loans, KfW does not require any special loan collateral for a doctoral loan, but evaluates the income to be achieved later as a sufficient guarantee for loan repayment. The extent to which Credit Bureau negative entries affect the lending for the promotion depends on the award criteria of the chosen bank. Cream Bank makes a Credit Bureau request, but only evaluates an applied personal bankruptcy and no other negative features as an obstacle to the granting of the loan.

University lending

University lending

Most universities offer the possibility to apply for a doctorate loan at least during the last phase. At almost every university, the limited funding available for lending means that a commission consisting of professors and students deals with the individual applications and often makes decisions based on the interest in the topic of the doctoral thesis rather than on scientific aspects. At some universities, a guarantor is also required when applying for a doctorate loan.

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Swiss loan for self-employed and freelancers

 The self-employed and freelancers do not receive a classic loan , since the acceptance criteria of the few banks in this segment only provide commitments to employees. If a business is only practiced as a part-time job and the main job fulfills the requirements, lending to the self-employed is possible.

A necessary condition for Swiss loans is an unlimited and permanent employment relationship with a monthly net income of at least approx. $ 1,150. It must be attachable income. The minimum income is a requirement for single people without maintenance obligations – it increases by a fixed amount for each person who has such obligations.

Why don’t self-employed people get credit from many banks?

Why don

Self-employed and freelancers are also much more difficult to obtain loans than employees and civil servants in the conventional lending business. This is due to several circumstances. First, banks are faced with a higher processing effort when it comes to checking the application of the self-employed, which also has to be largely done manually. While employees only have to submit a few pay slips, the self-employed require a current business analysis as well as a review of the latest tax assessment and advance payments. Many banks also use questionnaires. B. advance to the development of the order situation.

Secondly, credit agencies such as Credit Bureau rate the credit default risk of the self-employed (especially traders in the narrower sense) much higher than that of employees. The reasons are obvious: Income is more difficult to plan and the operating profit of small companies is subject to major individual risks such as: B. the default of an important customer, etc.

Third, Swiss loans are specifically tailored to borrowers with a manageable financial need: the maximum available net loan amount rarely exceeds $ 5,000. However, the (private) financing needs of many self-employed people go beyond this level. Last but not least, self-employed people tend to repay the loan early after overcoming financial bottlenecks, which the banks no longer see as an attractive contract profile since the statutory upper limit for early repayment penalties.

How can self-employed people and freelancers increase their credit opportunities?

Since the market for Swiss loans on the part of the providers is quite narrow and the acceptance criteria of the few foreign banks are very homogeneous, there is no realistic chance for the self-employed: it is not worthwhile for these target groups to apply for a Swiss loan and the (foreseeable negative) Waiting for answer.

In relation to the regular credit market, there are some basic rules that can be used to increase the chance of a loan. In particular, the lowest possible fluctuations in income are important, which is a frequent problem especially for traders with actual taxation: if the business evaluation shows months with no or negative income, the risk of a payment disturbance increases significantly from the bank’s point of view. Unfortunately, the German credit market has so far not been able to produce installment loans with a quarterly repayment (in sufficient numbers).

Start-ups in particular should make sure that they file their tax returns as early as possible: Most banks require more than one income tax assessment for the income check. Residual debt insurance – theoretically conceivable as a kind of credit default swap for small businesses – is also not suitable in practice to increase the chance of a loan: where the policies can be taken out separately, they only address permanent employees. Residual debt insurance can also protect the self-employed against unemployment – the standard is usually an income below X% of the contribution ceiling for statutory pension insurance.

Loan for self-employed with negative characteristics

Loan for self-employed with negative characteristics

The self-employed and freelancers with existing negative characteristics have only limited chances of getting a loan. The two main alternatives are loans against collateral and Peer2Peer credit marketplaces. The latter have somewhat more relaxed admission criteria, so that interested parties with negative Credit Bureau entries can also make an inquiry on the credit marketplaces. The nature of the credit report is known to the other market participants, so that borrowers either have to reject the loan (or the financing of a loan project that has not been completed) or face significant risk premiums on the interest rate.

Loans against collateral are widespread in the commercial sector and can also be used by self-employed and freelancers for loans with a private purpose. Securities (securities loan with payment option), life insurance (policy loans from a bank or insurer), building society contracts, real estate and motor vehicles are considered as collateral.

New criteria for Swiss credit coming soon?

In particular, the loan of largely unencumbered real estate promises success: With mortgage loans with a low loan-to-value ratio, low-interest financing can also be realized with existing negative characteristics – possibly in connection with a larger debt rescheduling and / or initial suspension of repayment. Unlike mortgages, mortgage loans do not relate to a specific loan and can therefore be used as a kind of “credit line”: after you have repaid the loan, it is relatively uncomplicated to borrow and with much lower land registry costs than with a mortgage. Real estate loans promise a much greater scope in terms of loan amount and term and significantly lower interest rates than Swiss loans.

So far, there is no reliable evidence that the acceptance criteria for Swiss loans will change in the foreseeable future in favor of the self-employed and freelancers. Such developments would, however, be conceivable in the course of further development of “social lending” and / or in connection with the Europeanization of the consumer credit market: Not only in Switzerland and Liechtenstein are other acceptance criteria for a loan.

The Swiss loan for entrepreneurs

While the self-employed and freelancers often have the chance to get a Swiss loan, the chance for entrepreneurs is rather slim. Because the Swiss loan primarily serves to finance private expenses and is in principle not intended as a kind of business loan. In addition, most credit brokers have set themselves the task of brokering Swiss loans almost exclusively to private individuals. On the other hand, if you, as an entrepreneur, want to finance an investment in your company with a Swiss loan, for example, the chances of finding a suitable lender are usually relatively poor, although we can recommend the entrepreneur loan from Lite lender .

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Property Separation and Creditworthiness

credit loan

Banks distinguish between two types of borrowers who can take, for example, a mortgage together. These are marriages covered by the property community, and couples (marriages covered by interfaith, life partners and even unrelated persons) who do not build joint property.

 

Property separation and credit

credit

If a couple with a property community buys an apartment on credit , each of the spouses becomes the owner of half of the property and half of the liability towards the bank. The couple is jointly and severally liable for repayment of the debt incurred.

If people applying for a loan jointly have property separation (or simply live in an informal relationship), then they can shape the provisions of the contract to a much greater extent , e.g. divide assets and debt differently than equally. In a sense, the bank treats them as a company, not as a marriage.

 

When is it worth deciding on property separation?

When is it worth deciding on property separation?

Separation of assets is essential if, for some reason, you do not want to be limited in important financial decisions. Separation is also recommended if you want to protect money from the effects of unsuccessful investments or unsuccessful projects. Only with the separation of property will a husband or wife not be liable with their property for the repayment of personal obligations of the second half.

 

The property community and the spouse’s consent to the loan

The property community and the spouse

It is worth remembering that the property community gives spouses the opportunity to conclude smaller loan agreements individually (e.g. consumer loans or payday loans) without the partner’s knowledge and consent. This is, moreover, one of the reasons why couples, in which one of the people is known for irresponsible use of financial services, decide on the separation of property. They do not want to bear the consequences of the spouse’s recklessness (e.g. having to pay back arrears or entering in the register of debtors).

 

How does asset separation affect creditworthiness?

How does asset separation affect creditworthiness?

Does therefore property separation have any effect on creditworthiness? Can have. An example is the situation when – thanks to the separation of property – one of the spouses manages to avoid liability for the spouse’s errors, including the burden on their own creditworthiness, income and assets. A married person who has a “clean account” still remains a reliable customer for the bank.

In the case of mortgage loans, asset separation is a neutral signal for the bank. The key to calculating creditworthiness will be how much your spouse earn, what other obligations they have, and how many people they support. The advantage will be, for example, the fact that both husband and wife earn, or that they do not have debts, including past due, in other financial institutions.

Whether the couple has a community or property separation will affect the way the bank constructs the loan agreement, but – under the normal scenario – will not directly affect the pair’s ability to take out a loan.

 

Mortgage loan with property separation

Mortgage loan with property separation

To sum up, when it comes to large loans (e.g. mortgages), banks have the tools to effectively handle marriages with a property community and with property separation. These arrangements between spouses will not directly affect the couple’s creditworthiness.

Property separation can be a practical tool to protect your personal creditworthiness from the consequences of financial errors of the second half. This applies especially to smaller loans, which can be taken without the knowledge and consent of your spouse or the effects of business failures.

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A Few Things you should Know about Creditworthiness

credit loan

Creditworthiness is, in a nutshell, our ability to regularly repay a loan. Depending on many different factors, our ability may be greater or smaller – the greater, the more credit can be given to us.

How do banks calculate our credit standing?

banks credit

Basically, every bank counts our creditworthiness in its own way. In another example simplification, you can define creditworthiness as the difference between our income and monthly expenses (including other loan installments). In this way, we know the amount that we can spend on paying off a new loan. Please note that after the T recommendation comes into force, our monthly credit obligations may not exceed 50% or 65% of net income. Otherwise our application may be rejected.

Of course, the most important parameter that is taken into account by all banks is our earnings. When applying for a loan, we usually have to provide a certificate from the employer confirming the amount of monthly salary. In the case of a fixed-term or indefinite employment contract, the matter is simple. In the case where we run our own business, we work on a mandate contract or for a specific task, the assessment of our ability is more complicated, as we become more risky clients for the bank. In this situation, banks decide to be much more cautious to assess the client’s ability. Therefore, it should not surprise us that having the same disposable income (it is the part of our income that we can spend on consumption, investment and savings – that is, after deducting fixed costs of living) as a person employed under an employment contract, we have lower credit standing.

Detailed calculations of our ability

The calculations have a big impact on the particular bank’s approach to the main issue – how much does a given person need to maintain monthly? Banks usually calculate these amounts very differently – from PLN 400 per person to even PLN 600-700 per person.

Sometimes banks include all loans, including “mobile” loans – an account loan or a credit card. It also happens that the banks count other maintenance costs – e.g. PLN 300 per car. Some scrupulously include every household expense, bills, etc., while others have a general, not very precise amount per head. Therefore, if a bank calculates your low or even lack of creditworthiness – try to check with another bank.

Credit problems

Credit problems

An important factor to which we should pay special attention is the form of our employment. Unfortunately, banks can reduce our creditworthiness by up to one fifth if we work on a specific contract or work contract compared to a person with an employment contract. For banks – which is sad – it doesn’t usually matter that a person has been getting the same income for a long time – and that he is comparable to a full-time employee.

Ways to increase creditworthiness

If you have several loans on your mind, it’s worth considering improving your financial rating – in the eyes of the bank. There are a few simple ways to do this. First of all – we are closing our overdraft. Opting out of credit cards can also help us – then “mobile” loans, which can be variable each month, will not be taken into account.

We can also submit applications for extension of repayment for other loans – this will reduce the installments and thus the cost of monthly liabilities.

Another method is a consolidation loan, which should reduce the amount of the total installment and thus improve the creditworthiness.

What has changed the provisions of the T Recommendation?

loan recommendation

First of all, the possibility of taking too much loans was limited – people earning below the national average cannot repay installments above 50% of their net income. For people earning above the national average, the limit is 65%. We must also have 20% own contribution, and if we do not have it – it is mandatory to insure it.

BIK – Credit Information Bureau

Credit

All information about our debt usually goes straight to the Credit Information Bureau – including unpaid installments but also information about recent loan applications from other banks. Since this is the first place that analysts of the bank that grant us the loan will look, it would be good to have a “clean file”. If we are not sure about the data regarding our person, we can get a report from BIK about our current obligations for a small fee.

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Benefits of having a pre-approved personal payday loan

cash

One of the things that most bothers people who are looking for a personal payday loan is to have to meet the requirements and paperwork requested by the financial institution they attend, in addition to having to wait for the evaluation to be carried out and decide if the Credit is approved or not. However, if you are a responsible customer, you can skip all this thanks to pre-approved loans.

These personal payday loans are granted before the client asks for them, that is, their credit history is evaluated, as well as their financial movements and if they do not have any debt and have been reported as a good payer, the bank decides to grant a loan for a X amount that he can decide whether or not to accept.

Having a pre-approved loan does not mean that you have a debt with the bank, but if you wish, you have the possibility to accept that credit because you meet the necessary requirements. But what are the benefits of having a pre-approved loan? Next, three of them:

You don’t need to comply with the paperwork to get it

First, the bank has already made an evaluation of your history and customer profile and if it was offered, it is because you are approved.

That’s why you no longer need to submit more papers or justifications. In most cases, just submit your ID to accept the credit.

It tells you that you have a good credit history.

It tells you that you have a <a href=good credit history.” />

Banks will not risk pre-approving a credit to someone who represents a risk; that is, if they notify you that you have a pre-approved loan, it is because they consider you a good customer and therefore allow you to access these types of products.

You can access it in less time than a regular request

You can access it in less time than a regular request

While on a regular basis it would be necessary to wait a few days for the bank to analyze your profile, your data and your documents, as all that was previously done, you will be able to access the cash in a much faster way.

If you have a good track record, you might even have several pre-approved loans, but that does not mean that it is wise to accept them all; On the contrary, the ideal is that you compare the alternatives and see which one suits you best.

If you want to check what pre-approved loans you have, use Lily Bart’s personal payday loan comparator and enter your ID to get that additional information.