What are savings loans anyway? Not much is written about this loan form. That is why we thought it was time to give some attention to this form of borrowing. A savings loan is sometimes referred to simply as a savings credit. This credit has agreements with the so-called ‘interest credit’. Since this form of saving or credit was widely ‘sold’ in the late 1990s and early 2000s, these savings loans are now about to expire.
Investments were often made with the money deposited and in many cases this did not go well. Since these savings loans, also known as premium loans, are now ending up in large numbers, it might be a good idea to take a closer look at them and perhaps transfer them to a personal loan. With this the book can be closed and you know exactly what has yet to be repaid and how long this will take.
What are the characteristics of a savings loan?
Savings loans have a number of characteristics that you will not find with other types of loans. You borrow money with which you save a certain amount and you can then take out a savings insurance policy. You pay premium on a monthly basis. Incidentally, the interest on this loan is usually not tax deductible.
Because you also pay interest on the amount of money you borrow. You repay the credit with the money that you were able to save thanks to the savings insurance.
These savings insurance policies have maturities from 15 years. After this period, the insurer pays out the insured amount accumulated and you can then use it to repay the credit. You can usually repay your savings loan early without having to pay a penalty.
Savings loan as financing for durable goods
By the way, savings loans are not nearly as suitable for all types of loan objectives. You can use this loan the very best to finance durable goods. You could think of goods such as kitchens, campers or caravans. The special thing is (and we wrote that at the beginning of this article) that this type of loan is only very occasionally closed.
And that while the loan has quite a lot of benefits. You borrow money while you decide how much to withdraw and when. In addition, you have low monthly payments and you have the certainty that you can repay the loan amount because you are saving money at the same time. Savings loans have agreements with a revolving credit.
Savings loan and revolving credit have agreements
The savings loan resembles the revolving credit in certain respects. With both loan forms you can determine yourself when and how much money you withdraw. If you withdraw money, interest will only be charged on that amount.
Long term and mandatory insurance is a disadvantage
Borrowing money always costs money. But the savings loan can save you money, at least if you take advantage of tax benefits. The disadvantage of this loan is that you are stuck with a long term of at least 15 years. And you are required to take out insurance with this loan type, namely the savings insurance. Another disadvantage or advantage (depending on the level of interest) is that the interest on the savings credit / savings loan is flexible.
Benefits of savings loan or savings credit
► You can repay without penalty
► Flexible when depositing and withdrawing money
► If you use the money for home improvement, the interest may be deductible
► The savings loan is also the repayment
► Just as with revolving credit, only pay interest on the amount withdrawn
But also disadvantages
► As described, a long duration
► Danger of rising interest
► Only suitable for long term planning