Civil servant loans – advantages and disadvantages

If you are looking for cheap loans, the official loan is not an unknown term – but why should the official loan be so much cheaper and can it really only be received by civil servants? Or is it just another advertising term without a real counterpart?


Officials preferred!

civil servants loan

In contrast to other catchphrases, which only refer to consumer credit / installment loans with a low loan amount, the official loan actually exists in this form, because civil servants belong to other professional groups, which can also benefit from an official loan preferred customer group of the banks. From the banks’ point of view, civil servant status weighs so strongly that, in a direct comparison, civil servants have to pay up to 50% less for repayments due to the significantly lower interest rates, and in some cases even have lower credit premiums and borrowing costs, because the banks are hard on civil servants as customers fight!

Because: Due to their special status, civil servants are practically non-resignable and receive an equal, guaranteed salary – 2 decisive advantages from the perspective of the banks compared to “normal” customers, who always (from the perspective of the banks) represent a higher risk of default due to salary fluctuations (Wage workers) or sudden dismissal and dismissal.

Double protection, low interest rates

low interest rates

But: The drastic interest discount is not only due to the fact that it cannot be terminated, but also because the civil servant loan offers double security: because in addition to the security of a fixed and equally high salary, the civil servant loan also includes a life insurance in the amount of the loan amount into which the payment is made repay the loan directly.

With this capital-forming life insurance, the loan amount is paid off at the end of the term, which means that the repayment costs are only incurred in the form of interest, but the otherwise due repayment portion for the payment of the loan amount goes to life insurance. This usually expires as soon as the loan becomes due and has to be repaid – with the payment of the previously saved amount, this can then be repaid in one fell swoop.

This has the following advantages for the bank and civil servants:

Bank / Lender: The life insurance in the amount of the loan guarantees the bank that the loan amount will be repaid in the event of death. In addition, there is certainty that the loan default or non-payment of insurance premiums is very unlikely given the high and secure income.

Officials / Borrowers: By securing the loan through life insurance, the survivors are protected from financial ruin due to the loan default. If home ownership was acquired, the life insurance policy will still deduct the loan in the event of death without the surviving dependents losing it.

Since life insurance is provided as security, there is also no need to take out additional life insurance, which is usual, and thus a financially burdening double payment (credit installments + contributions to life insurance).


Make a profit with the official loan?

home loans

But that’s not enough, because capital-forming life insurance has another advantage: With life insurance or its most need payment at the end of the loan, the payment is used to repay the loan and is deposited as security, but the claim to payment has not been assigned.

If the payment amount is higher than the agreed payment, which is not uncommon due to gains during the term, you can claim the excess yourself as a profit without the bank (at most the tax office) being entitled to it.


Official Loans – Disadvantages

Official Loans - Disadvantages

However, an official loan does not only have advantages: Despite the interest rates, which are often up to 50% lower, it is often comparatively more expensive than a conventional loan, because by not repaying the loan amount, the interest burden remains constant over the years instead of falling as with a conventional loan, is.

Although these higher interest costs can be offset at the end of the term by a higher profit distribution from life insurance, this represents a speculative risk compared to fixed repayments.

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