Donors will calculate lower returns if they are confident that these expectations will be met. This is also the case with loans. If the lender expects high defaults from 100 or more loans, he will raise the interest rate to compensate for this or expect high collateral or guarantees.
If it can be assumed that practically all of 100 or more loans will be repaid, very low interest rates can be calculated. Collateral is only relevant if a loan bursts and the lender wants to use it to get his money back. If it is assumed that the loan will be repaid in full, usually only one guarantee is expected: proof of a secure salary.
Normal employees and employees can be dismissed and therefore a fixed proof of salary is a security, but it is not as secure as a permanent employment relationship. Officials have a permanent contract and even if they are excluded from the service, they still receive money. As long as the official borrower does not die, the lender will be able to calculate the repayments. As a result, special official loans with longer terms are granted at lower interest rates.
Groups of people who can receive an official loan:
- Employees in the public sector
- police officers
- Official teachers
- Judges and judicial officers
- Official academics
- Probationary officer
For all groups, the employment relationship must either be permanent or at least 5 years. Depending on the exact situation, the lenders can reject or adjust the credit questions.
No requirements for official loans
Official loans are not regulated separately by German law as this form of credit, but are subject to the same rules as other loans. However, it is up to the donors to write and offer special offers. Since civil servants are a large group of people, it makes sense to offer loans that are tailored to their specific situation. However, each lender can set up their own terms and conditions. There are no mandatory guidelines for official loans.
In general, however, these are loans that the lender grants more cheaply and is aimed at fixed groups of people, which are grouped under civil servants but generally cover people with non-terminable employment relationships.
Official loan in combination with the capital life insurance
Most loans are granted as installment loans, in which a monthly repayment rate is paid in addition to the accruing interest, so that the loan amount decreases. However, there are also loans for which only the interest is paid in order to repay the actual loan amount at the end of the term. However, the lender has the risk that the borrower cannot pay.
However, this risk can be offset if another financial product is concluded, in which the money is saved at the end of the loan. Capital life insurance would be the best way to trigger a loan. The borrower pays the interest on the civil servant loan, he pays the contributions for the life insurance and pledges it to the lender. Both financial products expire at the same time and the borrower comes to zero. Should surplus capital life insurance accrue, these will be paid out to the borrower. Under certain circumstances, this loan financing can turn out to be cheaper than a conventional installment loan.