Why you should protect your payday loan against unemployment
If you are planning to buy your own property, you start with mortgage lending first of all from your current living and income situation. Over the years, however, changes can occur that are not always foreseeable. One of the most radical changes is unemployment. For paydayowners, the associated loss of income has a direct impact on the payday loan. If the loan installments can not be serviced for a long time, even the loss of the property threatens. Those who want to protect themselves as real estate owners against the specific case of unemployment, mainly has the following two options.
Residual insurance covers not only the death of the policyholder but also, if desired, incapacity for work and unemployment. If you as a policyholder are unemployed through no fault of your own and as a result can no longer afford to pay the loan installments, the remaining debt insurance will be taken over and will take over the installment payments for your payday loan. This depends on the contract for a maximum period of 12 to 18 months.
Depending on the insured event, however, waiting periods must be observed. If you are unemployed you should expect about three months. Only after this so-called waiting period are the installments taken over by the insurance company. In effect, the insurance pays only for a very limited period of a few months.
The contributions of the residual debt insurance depend on the amount of the construction loan . Many are taking out the insurance in connection with the loan at the bank so that the insurance contributions are part of the loan installment. Sounds practical at first. The disadvantage, however, is that in this way increases the loan amount and thus the interest on construction . Therefore, it may be advantageous to take out insurance with another provider.
Option 2: Unemployment insurance
The second way to protect your payday loan against the consequences of unemployment is to take out unemployment insurance (also called unemployment insurance) offered by some insurance companies. In the case of a loss of employment, the latter will also pay for the payday loan for a maximum period of 12 months. The installments are hedged up to a fixed upper limit.
But here too there are disadvantages: in most cases there is also a waiting period of three months. To make matters worse, the insurance premium must continue to be paid during this waiting period and during the time the benefits are drawn.
Since both the residual debt and the unemployment insurance take over the installment payments for the payday loan only for a limited time, it is always worth considering in individual cases, if one may invest the savings saved better, so as to prevent salary losses.
Alternatives to securing the payday loan
The best option is to advise those who are planning to invest as many imponderables as possible at the beginning of their financing and to take measures to secure their own payday loan. Because then a temporary unemployment can be bridged also from own resources.
- Planning for more generous reserves: It is best to cover part of the equity right from the start. We recommend the sum of at least three to four months’ net monthly salaries in order to be able to continue paying full installments for less than a year.
- Further increase in cash reserves: Even those who already have sufficient reserves for emergencies, it is well advised to continue to increase these at least in the first few years after receiving the payday loan. This way, you are better equipped for both income loss and other unforeseen expenses.
- Paying attention to flexible contract options with payday loans: It is important to know your contract exactly and to pay attention to the greatest possible flexibility before signing. Of particular importance is the right eradication strategy: Rather than take on themselves and too high repayment to choose, you can arrange a repayment rate changes in the loan agreement, for example, helps you one time without full income to bridge. Also a repayment suspension is possible. In case of emergency, be sure to play with open cards and talk to your bank – even if you have not been able to record repayments in the real estate agreement.
With our compound interest calculator, you can calculate various options and determine exactly how much, for example, a 1 percent higher repayment affects the life of your payday loan, but also the amount of your monthly installment.
loan amount Please indicate here which loan amount you need for the purchase, the new building or the follow-up financing. In the case of follow-up financing, this value corresponds to the amount of your remaining debt, which must be further financed. 190000 50,000 to 100,000 Nominal interest rate fixation in years Please choose how long your debit interest payment should last. This determines the period for which you want to set the offered interest rate or follow-up financing interest. 5 8th 10 12 15 20 25 30 Calculate personal interest and rate
Conclusion: Hedging is a must for property owners
Overall, there are several ways to protect your payday loan against unemployment – the most common are the remaining debt and the unemployment insurance. While each of them has its advantages and disadvantages, it is important that you use one of the options presented. Because even if we all wish never to lose the job, it can suddenly happen and then it is too late for the hedge. In addition to unemployment, there are of course many other reasons that can jeopardize the financing of your own property, for example illness or occupational disability. Insurance for real estate owners is therefore not only indispensable for families with children.
With all-round protection for your payday loan
Our on-site consultants will show you which insurances are necessary and useful in your own personal case – whether you’re buying a house, building or already owning a real estate. Whether you want to insure your family with a term insurance or want to protect your property via a building insurance: Our mortgage experts look forward to getting to know you better over the phone or in a personal conversation.