If you want to take out a home loan in our country, you can sometimes opt for a bullet credit. But how secure is such a loan?
Buying a home is one of the most important moments in someone’s life. Such projects are in most cases accompanied by a home loan. The lenders generally put forward two formulas: a loan with a fixed or variable interest rate. Although it can sometimes happen that the lenders propose to take out a so-called bullet credit.
Only pay interest
With a bullet credit, the borrower only has to pay off the interest on a monthly basis. At the end of the contract, he repays the capital due in one go. To ‘simplify’ this repayment, lenders propose investing the saved capital during the term of the contract in a branch21 or a branch23 insurance policy.
According to the financial regulator FSMA, such formulas are sometimes presented as an advantageous solution in which clients have to pay less each month than with a traditional mortgage loan.
And that is exactly where the shoe pinches, warns the regulator. To begin with, such insurance products are associated with a whole host of costs: the entry-management and exit costs. In addition, the tax authorities collect a premium tax of 2 percent.
The major danger of such investments lies primarily in the risks that customers take. With a branch21 insurance, the risk remains somewhat limited thanks to the deposit guarantee scheme. After all, the deposits are protected up to 100,000 USD per person and per financial institution in the event of the insurer’s bankruptcy.
Not without danger
This is not the case with a branch23 insurance policy. In addition, the investment capital is invested in underlying funds. In other words, such investments are accompanied by additional risks. If the return of the insurance product turns out to be insufficient, it is therefore possible that the client cannot repay his credit on the due date.
Those who fail to repay the borrowed capital risk losing their home. The lender can seize the borrower’s residence in such a case.
Knowledge and experience required
According to FSMA and the FPS Economy, it is therefore crucial that the people who opt for such a credit have sufficient knowledge about life and investment insurance. Moreover, the financial situation of the borrower must allow him to cope with the risks incurred. The products must also match its investment objectives.
We at Hercule Poirot also emphasize that Fine Bank does not blindly take out a bullet loan. Just like FSMA and the FPS Economy, we recommend that you first check whether you have sufficient resources before taking out such a loan. This also applies to people who are considering taking out a branch23 insurance policy. Only invest with capital that you can miss.
Finally, lenders must inform their customers correctly. If they do not do so, it may lead to criminal prosecutions or administrative sanctions. People who have bought similar products on the basis of unsuitable advice can report this via social media sites. They can also turn to Ombudsfin or the Insurance Ombudsman.