A civil servant loan is a special loan offer that is aimed at civil servants and civil servants. The official loan is characterized above all by the favorable interest rate and the sometimes long terms, which means that the monthly loan rate can also be kept low.
Civil servants as borrowers
Officials enjoy a special status in Germany. Not only are civil servants non-resignable, they also generate attractive income in many cases. In addition, wages paid by employers are transferred on time, making it easy to take out a loan and repay it in monthly installments.
For this reason, civil servants at banks are a welcome target group for loan offers such as installment loans or construction finance. Special official loans are also an offer from the banks, which was designed in cooperation with insurance companies.
The official loan
The civil servant loan is not a classic installment loan because it consists of a repayment-free loan and life or pension insurance. Borrowers only pay the monthly interest costs for the repayment-free loan during the term of the loan. At the same time, a new life or pension insurance policy is saved, the premiums of which must also be paid. When this insurance expires, the loan is repaid so that the loan is repaid in full.
Possible uses for the civil servant loan
The civil servant loan can be used individually, similar to an installment loan. With this loan, on the one hand, it is possible to make higher-value purchases and, for example, to finance a kitchen or a car. On the other hand, there is also the possibility to replace other, more expensive loans with the civil servant loan and thus save interest costs. Real estate renovation, repayment of Bafög debts or financing a dream trip are also possible.
Amount of credit
The amount of the official loan is in most cases dependent on the current monthly income. Many lenders grant the loan to civil servants up to 15 to 25 times the net salary, so that with an income of 2,500 USD, a loan amount of 37,500 to 62,500 USD can be granted. It should be noted that a minimum amount is often required for civil servant loans, which can be between 5,000 and 10,000 USD.
Prerequisite for the granting of an official loan
You don’t have to be a civil servant to get an official loan. It is also possible to get a loan for civil servants as a permanent employee of the civil service. However, it is important that applicants have been in the public service for more than five years. Also, an application is often only until 55th-57th Year of life possible, the repayment must then be guaranteed until he leaves the service, i.e. up to the age of 65.
The collateral for the loan for civil servants
It is not necessary to provide separate collateral for the civil servant loan. Life and pension insurance, which is compulsory when the loan is taken out, is sufficient as security for the bank.
Furthermore, as a security, as is also common with installment loans, a silent assignment of salary is agreed in the loan contract. This assignment of salaries enables banks to approach the employer in the event of payment arrears and to compensate the open rate as a garnishment. However, as long as the installments are paid on time, the employer is not aware of this borrowing. In this case one speaks of a silent assignment.
The repayment of the official loan
It is not necessary to repay the official loan during the term. Borrowers only have to pay the bank the interest costs agreed upon when the contract is concluded. The loan is then repaid in one sum at the end of the term, by paying out the pension or life insurance. These insurance policies are calculated in such a way that their disbursement amounts are sufficient to fully repay the loan. If surpluses remain from this, the borrower or the policyholder is of course entitled to this.
In the meantime, it is in many cases permitted to make special repayments in order to repay the loan early and save interest costs. The amount of these special repayments is agreed in the loan agreement and can vary from bank to bank.
The loan term for civil servants
The civil servant loan is usually a long-term loan with terms of at least twelve years. These comparatively long terms are necessary because insurance serves as a substitute for repayment and can sometimes also result in tax benefits. In addition, the long terms ensure that even large loan amounts can be easily financed with small installments.
The maximum term for official loans is often 20 years. In the case of installment loans, on the other hand, in many cases only loans with a term of seven years are found; in individual cases, terms of up to ten years are also possible. The rate is then of course correspondingly higher.
Insurance for civil servants
The life or pension insurance that is taken out in connection with a civil servant loan is usually coordinated with the term of the loan. This is the only way to ensure that the loan can also be repaid on the due date.
It is important that the insurance has guaranteed values and that these guaranteed values can be used for the loan repayment. Insurance without guaranteed expiry dates, such as unit-linked insurance, promises higher returns, but cannot guarantee 100% that the loan can actually be repaid. In the event of losses, borrowers would have to raise the outstanding amount themselves.
The advantages of an official loan
The civil servant loan can achieve various advantages compared to the installment loan. A big advantage here are the low interest rates that are charged for the civil servant loan. In many cases, these interest rates currently range from 4-6% pa In comparison, the banks sometimes calculate an effective interest rate of up to 12% pa for this, as well as the longer terms compared to the installment loan, which also results in a comparatively low monthly rate.
Combination with insurance is also advantageous. From this, borrowers can also secure their family, for example in the case of life insurance. The surviving dependents do not have to worry about repayment of the loan in the event of death, because this is covered by the insurance. It is therefore not necessary to take out additional credit insurance.
Possible disadvantages with the official loan
There are hardly any disadvantages to the loan for civil servants. Some borrowers describe the process somewhat cumbersome, but this is not the case in practice. Rather, banks and insurance companies come together here to create an attractive loan product for civil servants. The rather long terms are also not to be seen as a disadvantage, but rather as an advantage, since this reduces the rate burden.
A civil servant loan can be a good alternative to traditional installment loans for civil servants and public servants, as interest rates are lower and terms are longer. The monthly installment charge and the total charge from the loan are therefore lower. In addition, the civil servant loan, like installment loans, can be used almost universally and can therefore be used for (almost) all purposes.
Only when a short financial bridging is needed is the loan for civil servants not the right choice. Framework loans or short-term installment loans are usually better here.