Only to finance a significantly lower loan amount for follow-up financing. A loan without repayment has some disadvantages for the borrower. Final loan volume – repayment at the end of the term Anyone who fulfills a great wish, such as a vehicle or a property, will often take out a loan.
In particular, it is particularly important to consider carefully the repayment of the loan. The example: the bullet loan – a repayment-free loan. But what should you know in advance about the bullet loan and what other types of loans are there?
What does a bullet loan look like?
Anyone who makes a bullet loan – including a term loan, (bullet) maturity loan, or a repayment-free loan – will pay the loan amount in a single amount at the end of the fixed repayment term. Often, the term corresponds to the commit time or the commit time. Unlike a repayment or annual repayment loan, where the borrower repays the debt on a regular basis, usually on a monthly installment basis, a bank loan pays the capital raised only during its term.
The suspension of repayment is often referred to as an amortization suspension or TA loans for short. For the granting of fixed-term loans, such as life insurance or investment funds, which are transferred to the house bank as collateral, the providers usually demand repayment of the capital. The loan will not be repaid during the loan term. These are only the bond rates.
The loan amount is outstanding in one go
At the end of the period, the loan amount is outstanding in one go. The following example illustrates the principle of a repayment loan: I. Two. Three. four. five. The example is not a financial offer. The one who makes an annuity loan repays the loan in constant tranches, the so-called annual installments. The installment consists of a repayment installment and an interest sharing.
Over time, the repayment share increases – the interest expense calculated on the remaining debt. Both a conventional repayment loan and construction loans are often repaid in the form of renewal fees. This has the advantage that the borrower can prepare the repayment of the claim well and always knows how high the economic burden will be. There is also the so-called payable loan, often installment loans or ratings.
The repayment ratio has remained the same over the entire term of the loan, while the interest rate has fallen due to the decline. Definitive loans are rarer than annuity and repayment loans. Because: The house bank has a higher default risk. In most cases, a borrower pays off his debts on an ongoing basis. This reduces the default risk of the house bank with each payout.
In order for the borrower to repay his loan in one fell swoop, credit institutions generally require a repayment installment, such as a life insurance policy, which must be assigned to the principal bank. Therefore, a bullet loan is only granted if the borrower has other security features, such as: For example, a life insurance policy, the amount of which fully covers the loan, is available. The borrower has the option to refuse the payout.
A loan without repayment has some advantages for the borrower.
In order to compensate for the increased credit default risk, credit institutions generally calculate a higher interest rate for a fixed-interest credit business. In addition, the borrower pays more interest on a bullet loan in practice anyway than, for example, a loan with regular repayment.
The cause: The residual debt remained the same over the entire duration. Only in a few exceptional cases pays off a bullet loan. However maturing loans are often tied to a home savings or capital-forming life insurance policy at maturity. The principle: The private customer pays into the Bauspar insurance / life insurance and uses the Bauspar sum or the cover amount at maturity to repay the loan.
Often it is not worth it. In addition to the administration costs for two contracts, interest income often does not cover the interest on the loan agreement. In addition, it is not always ensured that the maturity of the investment is optimally coordinated with the expiration of the loan agreement. Who fits a bullet loan? Due to the security required by credit institutions, it is very difficult for private individuals to get a fixed loan.
Even the inclusion of a bullet loan is not worthwhile in most years. For example, if you buy and then rent a property, it may pay to take out a bullet loan. This is because loan interest is often credited in such cases. Even for self-employed who want to get into their own entrepreneurship and make appropriate security arrangements, a bullet loan can make sense.
A repayment-free loan can also be used as transitional financing.
For example, if you own your own home but want to move and buy another, you can often issue a bullet loan. The proceeds from the sale of the old property then flow into the repayment of the new, spherical loan. In addition, borrowers often hope for interest income on a bullet loan.
For example, if you have equity funds and use them as collateral for a repayment-free loan, you can make a profit depending on the performance. It should therefore be borne in mind that linking such an investment to a bullet loan involves a risk. When prices are falling, there may be insufficient equity to repay the loan at maturity.
What is the value of a fixed-rate loan? Even if it seems attractive to repay a loan at maturity, a fixed rate loan is not worthwhile in practice. It should be important for borrowers to repay their claims as soon as possible. Therefore, you should repay the loan volume as soon as possible in order to make the best possible use of the low interest rates. Anyone who needs a follow-up financing, in practice, also gets more favorable conditions, the lower the residual debt.
In most cases, it is more convenient to set up a repayment or annuity loan instead of a bullet loan. You can plan much better with an annual loan and are usually more flexible: Many providers offer you the option of repeatedly correcting and repaying the repayment rate. If your own financial situation changes in the future, eg due to a change of job or inheritance, you can increase the repayment rate accordingly.
Those who have dealt sufficiently with the topic of amortization in advance and have created a well-thought-out repayment plan can make the amortization as well as possible and save unnecessary additional costs.