Ever asked the question, why in the financial industry a car loan or a real estate loan just have such a name? The keyword is: earmarking ! But what about this purpose bond? Why are these and what does earmarking have to do with the Odette mini loan?
What is a purpose limitation?
Let us first of all clarify the terminology: The earmarking is superficially known in connection with loans and for a good reason, because the purpose of lending granted banks often different loan conditions. In the case of loans, earmarking is not uncommon to this day and is used in particular in connection with individual loan forms. Although it no longer necessarily influences the terms of a loan , it certainly does affect how a loan can be “used” by a customer.
As already indicated at the beginning, exactly this is to be recognized today in the designation of credits – be it in the form of a real estate loan, a motor vehicle loan, home loan, etc.
Sense of purpose
The purpose of the lending bank with earmarking is quickly and easily explained: For example, anyone wishing to finance a vehicle through a loan has a tangible asset that serves the bank as collateral against any loan default in the form of any unpaid loan installments , This means that the buyer of the vehicle just leaves this car to the bank as collateral for the duration of the loan. In return, banks often provide the borrower with cheaper interest rates, lower processing fees or the right of early repayment. A credit business that is worthwhile for both sides!
By contrast, ordinary installment loans eliminate the purpose limitation, leaving you free to choose what you are using your loan for. Be it for the replacement of the credit line, the financing of the holiday or the purchase of consumer goods – it is up to you!
Likewise, we think of Odette with our credit. Whether you apply for a € 199 mini loan or a higher loan. You can dispose of this loan completely free without having to inform us about the intended use. The Odette short-term loan with earmarking is not there, but the fair mini loan at leisure!
Editor: Markus Gildemeister
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