A distinction is made between a final loan and an annuity loan.
As is well known, there are a wide variety of loans and loans for a wide variety of financing. The way of repayment of the financing taken out can be differentiated more precisely. Here one differentiates between the annuity and the final loan. The difference between the two is that in the annuity loan, the borrower repays this loan throughout the term. That means you pay off your financing monthly or in quarterly installments on a regular basis. Then there is the interest rate agreed at the beginning, which is also paid off in installments. The final loan is somewhat different here: the interest is due in regular periods, but only the interest. The interest rate can be fixed or variable here. However, the repayment of the loan debt does not take place in certain periods,
Requirements for a final loan
Well, at first it may not sound like there are advantages to it, because how should you repay all of your funding at once? This is exactly what the bank is thinking and to ensure that you have the necessary capital at the end of the loan term, many banks insist on a repayment instrument. Such an amortization instrument can be a life insurance, a home savings contract or an investment plan.
In general, any investment that can be saved can be claimed. If you take out a final loan for your financing, you must undertake to make regular payments into your respective repayment instrument. The concept is that you increase your capital from the interest on your redemption instrument. A final loan is particularly advantageous if banks charge high interest rates on loans because the interest on your deposit in the repayment instrument also increases. The debit interest is, so to speak, balanced with the credit interest.
The redemption instrument in the hand of the bank
Now, of course, a bank must be sure that you not only have a repayment instrument, but that you also make regular deposits. It is therefore important for the bank to have a redemption surrogate for your redemption instrument. In plain language, this means that the bank will be informed of the lack of deposits by the company with which your redemption instrument is located. In addition, the bank has the security that you cannot terminate your redemption instrument prematurely, but only with the consent of the bank.
Final loan without a repayment instrument
With a final loan, it is common to have a repayment instrument. However, there are also special cases in which one can be dispensed with. To do this, however, you must provide evidence and the bank must believe that the repayment amount will definitely be available at the end of the loan term. If the repayment instrument is no longer available, your costs will also be reduced since you only have to pay the interest on the final loan over the term of the loan. For example, if you would like the money to be paid out before your life insurance expires, a bank can grant you a final loan without the need for a repayment instrument. However, only in the amount that life insurance also covers. However, your investment will then be pledged to the bank so that you cannot cancel it.