A residual debt insurance comes in when borrowers cannot pay their installments. But there is a price to pay for it: the completion of such protection increases the interest on the loan. In addition to the high costs of residual debt insurance, critics complain about the lack of transparency in many contracts. The Bundestag now wants to create new regulations.
Taking out a Green-Touch loan for the dream house, the new bathroom or a car is as cheap as a long time, thanks to the low-interest phase. Nevertheless, many borrowers often incur high additional costs after signing the contract. Reason for this is so-called residual debt insurance. These close many customers in parallel with the loan to secure themselves and their loved ones in case of solvency. Because the residual debt insurance serves as protection if the borrower can not repay his monthly installments, for example, because he is unemployed or even dies.
Remaining debt insurance: Non-transparent contracts require new regulations
Due to the residual debt insurance, borrowers do not have to worry about financial bottlenecks that their credit-financed belongings will be taken away from the bank. In addition, they need not be afraid to burden their relatives on death with the loan taken.
But consumer advocates advise against the conclusion of such a hedge rather. For them, the cost of residual debt insurance is often out of all proportion to their benefit. In addition, many contracts are intransparent, so insureds often do not know what additional fees they expect and when the insurance really takes. The Bundestag has now taken this as an opportunity to ensure stricter regulations and greater transparency.
The cost of residual debt insurance should be more transparent
In the future, customers will have to receive a letter of information within seven days after the consultation or after the insurance has been taken out. Among other things, this must inform about the exact costs of the residual debt insurance as well as the entire loan. “We create more transparency with consumers in terms of risks and the costs of taking out a residual debt insurance,” praised the SPD financial expert Marcus Held.
So far, this protection has been sold by many banks as meaningful protection and security for the loan. However, there were hardly any regulations, so that some institutions did not inform their customers about the associated fees before signing the contract.
Better advice and more information on residual debt insurance
In addition to the often non-transparent costs of residual debt insurance, another criticism is that borrowers are often not informed about alternatives. To hedge the repayment of the loan, for example, consumers have other options with life insurance.
In addition, many lenders have in the past given the impression that residual debt insurance is a mandatory requirement to obtain the desired loan. This should now change thanks to the newly created information and consultation obligations. In addition, there is an extension of the right of withdrawal. The 14-day deadline for a revocation will start in the future only with the receipt of the mandatory information letter.
No news: further high costs for residual debt insurance
The decided innovations are supposed to bring more transparency and stricter regulations. However, they do not change the often horrendous costs of residual debt insurance. Thus, the effective interest rate for the loan can more than double due to the hedge. Even the high commissions of the banks for the conclusion of a residual debt insurance was not stopped. According to a study by the Federal Financial Supervisory Authority (BaFin), these are sometimes more than 50 percent.
Customers are informed too late about the cost of residual debt insurance
In addition, the new regulations are criticized because they create the desired transparency only after the conclusion of the contract. For Green politician Nicole Maisch, in particular, the information about the higher cost of the loan through the residual debt insurance would already be made when comparing different loan offers. For example, the effective interest rate for the loan without insurance and protection could be given. However, this proposal did not appeal to the Bundestag. The residual debt insurance remains controversial.