Choosing the right loan insurance.

Loan insurance compensates the borrower following various events that may lead to an inability to repay.  However, whatever the risk, it is strongly recommended to get the best information from your insurance.

Loan insurance an element to take absolutely into account in your budget. Following these brief explanations, we then ask the question of the criteria for loan insurance that are taken into account as well as the different forms of insurance that may exist on the market.

Loan insurance criteria to take into account

Loan insurance criteria to take into account

With identical guarantees, the cost of loan insurance can be higher or lower. Loan insurance takes into account many criteria such as the age of the borrower, the mortgage applied for, its duration, the number of people to be insured, etc.

Let us not forget that this loan insurance allows the bank to protect itself in the event of non repayment of the borrower. Consequently, the more fragile the criteria, the higher the cost of insurance.

Today, there are two types of insurance: group insurance and individual insurance. The bank which grants you its credit will offer you its group insurance contract (group insurance). You should know that this insurance is offered to all customers of the bank, under the same conditions and at almost similar rates.

The objective of this loan insurance is to spread the risk among all the borrowers. Therefore, you are quickly harmed if you are young and healthy, as the cost of your loan insurance will be very high.

This is why since 2010, it is now possible to compare different loan insurance offers, called individual insurance, and choose the one that suits you best. The so-called individual loan insurance is adapted to the profile of the borrower, thus allowing certain borrowers to make real savings.

So do not hesitate to inquire and compare the loan insurance offered by your bank versus individual insurance.

Take into account the cost of loan insurance

Take into account the cost of loan insurance

Do not forget to take into account the cost of your loan insurance in your overall budget because this, depending on your profile, can represent up to 30% of the total cost of your credit.

So be sure to choose the loan insurance that works best for you and costs you the least.

TO REMEMBER !

  1. Loan insurance can be a cost if you don’t pay attention
  2. You can choose between group or individual insurance according to your profile
  3. Compare insurance to get an attractive insurance rate

 

Why can credit cards lead to a debt trap?

 

Credit cards lower the barrier to spending money

Credit cards lower the barrier to spending money

Credit cards lower the inhibition threshold for spending with many credit card holders. Credit cards help many consumers to spend more than their personal financial circumstances allow.

Credit cards worsen the overview of the financial situation

Credit cards worsen the overview of the financial situation

  • The overview of compliance with the personal financial budget can easily be lost when using a credit card: Compared to paying with cash, consumers are often less aware when using a credit card whether and to what extent the household budget has already been exhausted.
  • Consumers who are already indebted find it increasingly difficult to plan the scope of invoices and reminders with increasing indebtedness, and in particular with a large number of creditors. If a credit card is also used, the risk of completely losing the financial overview increases.
  • Once accustomed to credit card payments, consumers find it difficult to return to other forms of payment.

Credit Card: Interest and Fees Increase Debt

Credit Card: Interest and Fees Increase Debt

The original invoice amounts are often still easy to pay. However, due to accruing interest and fees, the level of debt gradually increases – surprising for some debtors.

Credit card holder fees

Additional fees may e.g. B. incurred in payment transactions outside the dollars area or when returning direct debits.

Beware of “revolving credit cards”

Revolving credit cards combine a payment function with an on-demand loan, which is mostly repaid in monthly installments (between 5 percent and 50 percent of the loan amount, depending on the agreement).

When the revolving card lures…

  • With an individual credit limit, Revolving card holders are given more time to pay for goods and services. The debt is repaid in the form of an installment loan.
  • In addition to the selected monthly installment, borrowers can make special repayments at any time to repay the installment loan more quickly.
  • The credit card holder can make further withdrawals by purchasing goods or withdrawing cash within the specified personal credit limit – even if the previous credit drawdown has not yet been fully repaid.
    Revolving card risks
    A credit card installment loan often incurs significantly higher interest rates than a current account overdraft facility or a bank installment loan.
  • According to an investigation by the Astro Finance (June 2011), the Revolving credit card issuers demanded effective annual interest rates of up to 17 percent and sometimes even more. (The “leader” among credit card issuers even charged up to 25.9 percent interest.)
  • Already in March 2009, Ilse Aigner, the Federal Minister responsible for consumer protection at the time, explicitly warned of the dangers of revolving credit cards.