Remaining debt insurance for consumer credit
With a loan, consumers are increasingly offered a so-called residual debt insurance. Unfortunately, the offers of banks and credit institutions are difficult to comprehend, as the costs are not presented transparently. Furthermore, it is rarely clear whether it is a voluntary additional offer, or whether the insurance is a mandatory requirement for consumer credit.
- 1 sense of a residual debt insurance
- 1.1 Real Estate Financing
- 1.2 Car financing
- 2 Remaining debt insurance and debt restructuring of a loan
- 3 Revocation of a residual debt insurance
- 3.1 Relationship between credit and residual debt insurance
- 3.2 Dealing with invalid cancellation clauses
- 3.3 Immoral Contracts
Sense of a residual debt insurance
With the help of a residual debt insurance, you can secure loans that are still open. This is especially useful if the borrower can not stand alone for it. The scope of the insurance packages varies by provider and should be compared in advance. In general, however, the insurance of the borrower takes place in the event of death, and usually additional risks such as involuntary unemployment or disability are also covered. Still other institutes continue to help in the event of sickness, when wage payments are no longer made. This makes it clear that a residual debt insurance always brings benefits for both sides. By concluding such an insurance contract, the bank or savings bank has greater assurance that the loan will be repaid. In addition, the borrower does not get into the debt trap.
A residual debt insurance also makes sense if you want to finance a property safely . Mortgage lenders offer insurance in most cases. In general, two groups can be distinguished: On the one hand, there are insurance offers that intervene in the event of death of the borrower. On the other hand, the financiers offer extended offers that cover unemployment and disability. Especially useful is the pure death assurance, should you build a house or buy. Such an insurance contract protects the survivors and keeps the home even if a main earner no longer exists. Such residual debt insurance is comparable to a risk life insurance policy. However, insured persons do not have to undergo a health check and all outstanding liabilities from the loan are hedged independently of the term. Furthermore, it is advantageous that the expenses decrease with increasing repayment.
If additional criteria are to be covered, residual debt insurance is less attractive. The costs reach disproportionate heights and the conditions are often to the detriment of the insured. If you become unemployed or incapacitated for work, you must first wait three or six months for the insurers to pay.
Since many credit providers offer the residual debt insurance during a consultation, customers often have the impression that the insurance contract is part of the credit agreement. However, this is rarely the case. The credit institutions usually grant a consumer credit even without insurance. Little sense makes such insurance in the following example: If you want to buy a new car worth 30,000 euros and thereby only 15,000 euros can be financed through a car loan . If the car is then still protected by a fully comprehensive insurance contract, a residual debt insurance is usually not appropriate. Here the equivalent value of the vehicle would be completely sufficient to secure the financing. If it came under similar conditions to the conclusion of an insurance contract, the termination of the same is recommended. An expert will help with such cases and identify ways to terminate the residual debt insurance contract. However, if you are dependent on the car for professional reasons, it makes sense to provide protection against unemployment: the bank incurs the car in the event of outstanding installments, which makes it very difficult to re-enter a new job. It is advisable to keep the residual debt insurance or to conclude such insurance.
Remaining debt insurance and debt restructuring of a loan
If you want to benefit from cheaper interest, rescheduling a consumer loan makes sense. This approach also enables them to cancel costly residual debt insurance. Unfortunately, this is associated with significant hurdles, as the calculated balance of the bank is often surprisingly high. In addition, the rule is that institutions usually only rarely repay existing residual debt insurance. An expert is the first point of contact to examine your own case individually. The appraiser checks the total amount of the remaining claim and takes over the insurance termination. In general, one can usually make use of a so-called special right of termination, if one replaces the credit. Here, the reason for the residual debt insurance is eliminated, so that a termination in general, nothing stands in the way. In addition, consumers are entitled to a credit note for their unused contributions. Unfortunately, banks like to ignore this point, which is why advising a freelance expert is advisable.
Revocation of a residual debt insurance
If you do not want to declare a residual debt insurance anymore and have just completed it together with a loan, you need to act swiftly. An independent appraiser usually helps very well to examine the various options. It is particularly easy to revoke an insurance contract while the legal deadline is still running. Within the period both contracts are considered independent. It is never permissible for the bank to terminate consumer credit unless the contract is concluded. However, this is impossible, the residual debt insurance should be condition for the loan. In some cases you can talk to the bank and, if necessary, conclude a new loan agreement that does not require the insurance. An appraiser will help here.
Connection between credit and residual debt insurance
For many years it has been argued that there are two ways to decide whether or not credit and residual debt insurance are related businesses. An economically binding business is the two contracts when the insurance is a prerequisite for concluding the loan agreement. This fact is undisputed and clear. If the banks are obliged to include the insurance costs in the interest calculation for consumer credit, this is also a related business. This increases the annual percentage rate of the insurance – it must be reported in full.
The matter is particularly complicated when the consumer credit and the insurance contract are independent. There are two different contracts in each case. Consumer advocates often argue that, under certain conditions, this is also a related business. Banks and insurers dispute this, however. For the first time, the Federal Court of Justice (BHG) created clarity with its judgment of 15.12.2009 and concluded that there is an economic connection. As a rule, it is the case that the banks raise the premium for the residual debt insurance to the original loan amount indicated by the applicant. In this way, the institutions finance the insurance in whole or in part via consumer credit. There is no doubt that there are two related businesses here. On January 18, 2011, the BGH continues the previous ruling. This has consequences for consumers who want to take back their loan agreement: Since it is a related legal transaction, the borrower is no longer bound to the residual debt insurance in case of revocation of the loan agreement.
Dealing with invalid revocation clauses
Based on the judgments of the BGH and the case law of the European Court of Justice (ECJ), consumers have the option of revoking the loan or residual debt insurance contract even after expiry of the time limit specified in the contract. However, this is only the case if the terms of the cancellation policy are wholly or partially ineffective. Here the deadline for objections set out in the contract is canceled – even though the insurance or credit agreement itself is valid. Little is known that today applies to most degrees. That fact makes it easier for borrowers and insured people to break away from unpleasant contractual relationships. The credit and insurance contracts are therefore not legally binding because the wording does not comply with the legal requirements. It is advisable to hire experts to check the clauses if you want to sell a contract. In general, it always comes down to every single word, so that the layman barely sees through here. A freelance consultant has the experience and expertise to validate such a deal.
It is easier if a loan and a residual debt insurance are a mutually economic business. Here, the revocation clauses always have to refer to the other contract –
– otherwise they are not valid and it is easy for the insured and the borrower to revoke the contracts. An indication that the right of withdrawal has not been written in accordance with the statutory provisions is, if the following point is missing: If there is an instruction that the bank repays the premium for the end-of-school insurance in the event of a loan cancellation, the revocation is easy. In general, it is also advisable to have an independent expert check the individual clauses.
If the costs for the loan contract and the residual debt insurance are too high, you can make the contract immoral. It is also easy to revoke here. The offense of immorality occurs when the following criteria are met: According to BHG, the state is given if the effective interest rate exceeds the interest rate by 100 percent, which is common in the market. If it is twelve percent higher than the market rate, the loan agreement can be considered immoral.
One disadvantage is that the BGH did not take into account the residual debt insurance until now when assessing the interest rate. This was due to the fact that the jurisdiction for immorality examination referred to constellations in which the residual debt insurance costs amounted to only one or two percent of the loan amount. However, the reality is often different, because the premiums often increase the cost by 20 or even 30 percent, if you take out a consumer credit and residual debt insurance. Today, the courts usually judge the consumer in such cases. It is assumed that the institutions therefore act immoral, because the insurance primarily serves the interests of banks.
A judgment of the regional court Bonn created clarity: in the year 2007 it judged that in the calculation of the effective interest rate the contributions to the remaining debt insurance must be considered, they should make a large part of the loan amount. The Higher Regional Court of Hamm came to the same conclusion in the same year that immorality exists if the premium deviates significantly from the market rates.
Consumers who can prove their immorality to your institute enjoy special advantages. In this case, the bank undertakes to provide the capital interest-free for the entire time used. All parts that exceed the net amount can be used here. In the case of a general immorality of the residual debt insurance, the insured persons are paid premiums, so that they receive enormous cost advantages. It is advisable not to follow this path without legal assistance. An independent appraiser is the first point of contact because he knows the relevant court decisions and reviews the relevant clauses.
Conclusion on residual debt insurance for loans
The conclusion of a residual debt insurance is often useful and comes in many cases in question. However, such insurance is unnecessary and expensive if the insurance contract was closed in an indecent manner. Thanks to the current legal situation, consumers now have several options for revoking the contract and, if necessary, choosing a more attractive tariff. This nonsensical contributions are effectively avoided and saved. Unfortunately, it turns out that most of the current contracts are overpriced. Savings are conceivable through rescheduling and other measures. In any case, the advice of a free, independent expert is advisable both before concluding the contract or when requesting a revocation. He checks the relevant clauses, compares offers and helps with the constitution of the revocation.