The cost of a loan in the future
Last week, the Federal Council passed legislation that would force banks to provide more transparency on the cost of a loan in the future. The new regulations should serve consumer protection. Especially so-called residual debt insurance policies have long been in the sights of consumer insurers. The policies protect the borrower and thus also his bank against death, incapacity for work or even unemployment. The premiums for these residual debt insurance policies are quite impressive: consumers sometimes have to pay 30 or 40 percent interest effectively every year.
The new directive, which will be binding from the middle of the next year, should stipulate a clearer presentation of the costs. It might look something like this: Banks provide the borrower with two loan offers – one with and one without residual debt insurance. The costs of the insurance protection are then transparently visible. Remaining debt insurance is generally not recommended. They are very expensive and serve mainly the bank. Not only does it receive a high degree of assurance, but it secures itself against significant parts of the default risk.
The implementation by the banks
However, how the implementation by the banks will actually look is still open. The credit institutions have some leeway: insurance costs must be explicitly disclosed only if there is a connection between the interest rate and the conclusion of the policy. As a rule, banks do not pass on their outsourced risk to their customers, so there is no formal link.
According to experts, consumers should act confidently and on an ongoing basis towards their bank and insist on fair conditions. One way to do this is to calculate the net present value of loans. This is understood in the jargon as the gross profit of the bank, which generates this through a loan. Based on this value, negotiations can be conducted with the bank on an eye-to-eye basis. Those who are unfamiliar with bank mathematics should seek the help of professionals.