Anyone who has ever been in his life at his house bank for a loan or installment loan interested and while the conversation with the bank consultant has sought, which should have encountered the term ” residual debt insurance “. Explained from the mouth of the bank adviser, such insurance seems absolutely reasonable and therefore necessary. But is that really true? Not at all and that has its reasons. Let’s put a little light on the matter with the following article.
Remaining credit insurance: useful or profiteering?
First of all, the determination of what a residual debt insurance basically does: If due to external influences such as unemployment, long-term illness or even death, the monthly loan installments can not be repaid temporarily or permanently, the residual debt insurance. Sounds good, but has its catch.
The question of the reasonableness of a residual debt insurance for credit can therefore be answered in the view of the lending bank basically only with a YES, because the bank always earns a commission on the mediation of such insurance and also secures the granted credit. For consumers, on the other hand, it makes no sense in the vast majority of lending transactions except the fact that consumers pay for it. In addition, residual debt insurance policies are considered to be highly inflexible in their contract design. In this respect, it is recommended to offer the bank reasonable alternatives to the residual debt insurance as a credit protection.
Remaining debt insurance: Consumer advocates warn
This is confirmed by current statements of the consumer centers in Hesse and Saxony. From the point of view of consumer advocates, the 108 policies under review for residual debt insurance are altogether too expensive, too inflexible and anything but consumer-oriented. The main criticism is the additional financial burden on the loan secured by a residual debt insurance, because the insurance first increases the installment loan, which also increases interest rates. So it can happen that the interest rate for installment loans and residual debt insurance often doubles. What will then be quite an interest rate of 20 percent can be achieved.
Offer alternatives to credit protection
Those who would like to actively protect themselves from the unnecessary additional financial burden of a residual debt insurance for the loan should offer the bank corresponding alternatives to the credit protection. For example, an existing life insurance policy or a home savings contract provides a valuable security for the bank. A term life insurance is also accepted as collateral by most banks. For expensive residual debt insurance, there are quite reasonable alternatives – you just have to know as a consumer! However, it would be absolutely desirable for bank advisers to point out these alternatives to credit protection on their own and not focus exclusively on brokering the so-called RSV!