The residual debt insurance is always in focus when it comes to credit issues. Does it make sense or just an additional profitable element for banks and credit institutions? A residual debt insurance can be worthwhile for large loan amounts and long terms, for small loans and short terms it is usually superfluous.
Borrowers are not obliged to take out residual debt insurance, it is an independent insurance benefit. Many direct banks and credit institutions also draw attention to this, but some tie the lending to it and only grant a loan with residual debt insurance.
The residual debt insurance – protection against insolvency
The purpose of residual debt insurance is to secure monthly installments. Life and especially the income situation can change, unemployment and illness are risks here that can make the borrower insolvent, but also in the event of death and if no guarantor or security is available, the loan repayment is at risk. This is where the residual debt insurance comes in, from which the amounts due are then repaid.
However, the scope of the insurance benefits is crucial. In practice, there are three tariff models for residual debt insurance. The minimum coverage guarantees payment of the remaining amount in the event of death, the combined coverage applies in the event of death and incapacity to work. The full coverage provides for payment in the event of death, incapacity to work and unemployment. However, restrictions can be found within the different models, for example that unemployment rates are only paid for the first 12 months. Anyone interested in online credit with residual debt insurance should carefully examine the conditions and benefits.
Offsetting against the loan amount causes higher costs
The residual debt insurance is taken out at the same time as the loan, a later conclusion is not possible. Banks and credit institutions usually set a one-off amount, which is then added to the loan amount and added to the interest, which can increase the cost of the loan as well as the monthly rate. The cost of the residual debt insurance should not exceed 10% of the loan amount, otherwise the cost of the loan is disproportionately high and can be fatal to the borrower.
Decision only after checking the conditions!
Online credit with residual debt insurance generally only makes sense for large sums and long terms. However, the conditions must actually be advantageous and the relationship between the loan amount and residual debt insurance must be correct. Therefore, read the terms of the contract carefully and ask questions if there are any ambiguities.