Civil servant loan is a kind of installment loan
The civil servant loan (civil servant loan) is a classic loan product that belongs to the portfolio of every credit provider. According to its functioning, the civil servant loan is a kind of installment loan, but it is the epitome of a loan with very favorable conditions. According to some special features, it differs from the other forms of installment loans. In the first place, it is the target group of people to whom an official loan can be granted. It is also the advantageous loan conditions and the special type of repayment. The target group primarily includes civil servants (hence the term civil servant’s credit) for life, but also employees who work as public service employees who cannot be terminated. The commonality of these groups of people is that they cannot be terminated, which means a first-class credit rating for the lenders.
The most notable terms of the official loan are as follows:
- personally selectable loan amount (limits vary from bank to bank)
- personally selectable duration, between a minimum of 84 months and a maximum of 240 months
- in contrast to other forms of credit, permanently lower and guaranteed constant loan interest rate throughout the entire term
- due to the constant interest rate, guaranteed constant monthly rate throughout the entire term
- a discount is possible at the request of the borrower
- personally selectable availability of the loan amount (e.g. to finance a property, a car or a vacation)
- At the borrower’s request, special repayments such as repayment of the remaining debt are possible without prepayment interest
- A possible early termination is possible at any time, also without prepayment interest
- At the borrower’s request, additional insurance can be taken out (e.g. death insurance, incapacity insurance, occupational disability insurance)
- there are generally no processing fees to be paid
- the processing time is relatively short
Civil servant loan can only be approved after a credit check
The most characteristic feature of the official loan is that it is repaid at the end of the term using a one-off payment. To do this, the borrower must take out a life insurance policy (with the sum insured and the term that is the same as the loan amount and the loan term) at the same time as the loan agreement and lend it. Repayment is made at the end of the term through the payment of the life insurance. As a result, the borrower does not have to pay any repayment for the loan, but only loan interest, but instead of the repayment installments, the insurance premium. This type of repayment offers the advantage that the borrower can earn a surplus, but at the same time runs the risk that he will have to accept losses if the term life insurance of the capital life insurance turns out to be less than the loan amount.
As with any loan, a civil servant loan can only be approved after a credit check or it can be rejected because of negative Credit bureau entries. Depending on whether they are serviced regularly or not, current loans can increase the borrower’s creditworthiness or become a reason for rejecting the new loan. Depending on the bank, the maximum amount of the loan to be approved can be made dependent on the income of the respective borrower. B. that it must not be more than 15 times or 20 times its net household income. The age of entry and the age of the borrower at the end of the term also play a decisive role in the approval of an official loan.