Author

Rabia Uyar

Browsing

THE MAGICAL INVESTMENT TRIANGLE

The magical investment triangle. In times of historically low interest rates, private investors in particular are increasingly asking themselves how they can invest their money sensibly. Whether time deposits or overnight deposits, savings accounts, corporate or government bonds, stocks, ETFs or real estate – each type of investment has its own advantages and disadvantages. For investors, it is important to choose the asset class based on personal expectations of income or returns, security and availability. Since there is a natural conflict between these criteria, making the right decision is not always easy. The so-called magic investment triangle illustrates this conflict and helps to make an informed investment decision. In this article we will go into the meaning of the magic triangle for investors, give examples of tension conflicts and show you how you can use the magic triangle of financial investments in a meaningful way for your investment decision.

What is the magic investment triangle?

The magic triangle of financial investments offers investors an important point of reference for assessing asset classes by describing the 3 factors “yield”, “security” and “availability”. In finance, these factors are visualized in the form of a triangle: the magic triangle of financial investments.

The magical investment triangle allows investors to assess types of investment and to weight them according to their personal risk and expectation profile. One thing is particularly important: every form of investment always represents a compromise between the various factors. None of them meet the requirement to meet all goals, that is, to guarantee security and at the same time guarantee maximum yield and round-the-clock availability. The 3 desirable factors of the magic triangle at a glance:

  • The income factor
  • The security factor
  • The availability factor,

That is why the factors of the magic triangle are in conflict

The 3 corner points of the magic triangle are fundamentally in conflict with each other. For investors, this means: No form of investment reflects the optimum of the 3 factors. In order to achieve personal financial goals, different asset classes should therefore be sensibly combined with one another.

The following examples show the tension between the factors using various types of investment:

1. Security and yield:

2. Security and liquidity:

3. Income and liquidity

How high is the risk of different asset classes?

The question of the risk of an investment cannot be answered with precise figures. There are considerable differences between industries and companies, especially when it comes to financial products such as stocks. Investors are therefore well advised to combine various investment products with one another.

In this way – depending on your personal goals and your own willingness to take risks – a sensible middle ground can be reached between the corner points of the magic triangle: yield, security and availability.

With the magic triangle for a successful investment

The most important finding of the magic triangle is that investors have to accept limitations with every form of investment. If the return is the focus of an investment, the risk inevitably increases and you have to forego security. Which focus makes sense for you personally cannot be said in general terms and depends very individually on your goals and your situation.

WHAT IS ONLINE BROKERAGE INFORMATION AND TIPS

What is online brokerage Information and tips. Digitization has also revolutionized trading in stocks and other financial products on the stock exchange. Online brokerage allows more and more investors to invest in the financial market with smaller sums of money, take control of their investments and use securities to build up a fortune. We show you what online brokerage means and what actually lies behind the activity of a broker. With online brokerage, customer orders are transmitted digitally and the actual activity of the broker takes place in the background. Since brokers act on behalf of customers, they charge them for individual actions. These fees are also referred to as brokerage or, alternatively, brokerage.

How does online brokerage work?

The counterpart to online brokerage is going to the local bank advisor to develop an investment strategy and instruct the bank to buy certain securities. With personal advice, this process is usually significantly more cost-intensive. These costs must be covered by the expected returns. Therefore, a relatively high investment is required with conventional brokerage. Online brokerage replaces the consultation with an offer of information, which should enable the investor himself to decide on a certain strategy and the purchase of specific securities. The orders (purchases and sales) are also processed via the corresponding online portal. This results in significantly lower costs, which makes online brokerage attractive for small investors. In addition, ambitious or experienced investors who want to pursue investment strategies independently benefit from online brokerage.

What is an online broker? Difference to securities dealers and traders

Securities dealers operate largely independently on the stock exchange with the aim of increasing their available capital. In doing so, you follow a defined strategy based on comprehensive analyzes. Such securities dealers are also known as “traders”. In contrast to brokers, they do not execute orders on behalf of customers, but decide for themselves which trades they execute.

The majority of traders are institutional traders who act on behalf of banks, funds or insurance companies. The respective institution provides the start-up capital and expects an increase in this capital. The smaller part of the traders are private traders who trade with their own capital and generate their own income directly from it. However, this requires the use of a lot of private capital and carries a great risk. Private investors who try to increase their wealth with their savings through securities are not referred to as traders because they do not trade securities full-time and not for the main income. In contrast to securities traders, a securities broker accepts orders from its customers by telephone, fax or via an online platform and forwards the orders to the stock exchange or acquires the securities as a commission business. An online broker accepts orders accordingly via the Internet, i.e. usually via a web portal. As a customer, you do not see much of the actual activity of the broker. You will only receive confirmation of an executed order. The real work of the online broker takes place in the background.

What is a trade?

In the context of the stock exchange, a “trade” is initially the purchase or sale of securities, i.e. stocks or other tradable financial products. While “Order” only describes the order to buy or sell to the broker, the trade is the actual buying process.

A distinction is often made between investing and trading, although this distinction is not particularly clear. An investment is a rather long-term business that speculates on dividends, for example. Trading describes rather short-term transactions that are primarily intended to generate returns through advantageous sales.

Online brokerage vs. offline brokerage – which is cheaper?

Good to know: As a private investor, you do not have your own access to the stock exchange and therefore cannot trade securities directly. So if you want to invest money in stocks, ETFs , mutual funds, or other tradable financial products, you need a broker. Online brokerage is the easiest and cheapest way to have orders processed through brokers and thus to participate in the stock market.

Online brokerage is cheaper than conventional brokerage and enables you to decide on your own securities transactions. For this, however, the advice that a personal financial advisor offers is largely omitted. So you have to familiarize yourself with the topic of securities trading, develop your own investment strategy and implement it yourself. You are then not dependent on the often sales-driven advice of a consultant, but take your investment into your own hands. You alone make the decisions, but you are also responsible for the consequences.

Online brokerage is particularly suitable for small investors with a low budget and for ambitious or experienced investors who want to familiarize themselves with the securities business or have already familiarized themselves with it.

What is a stock portfolio – and why is it necessary for online brokerage?

The word “depot” actually refers to a physical storage room. Gone are the days when shares were certificates printed on paper. That is why a share portfolio in the digital age is an online portal, similar to online banking, in which the current stock of shares is displayed for an account. As a rule, orders for the purchase and sale of shares can also be issued via the securities account. Without their own stock portfolio, investors cannot buy securities. Opening a custody account is therefore mandatory for securities trading, regardless of whether it is short-term trading or long-term investing. Depending on the provider, a deposit can be associated with costs.

The exchanges are going crazy because of the coronavirus. What now?

In Coronavirus What Investors, Travelers, Employees and Entrepreneurs Should Know Now. Anyone who also invests in stocks, funds or ETFs in their long-term asset accumulation should not be guided by emotional, short-term decisions, but should reflect on their planned investment horizon. The stock exchanges often react to unexpected events with large price fluctuations. Private investors who, for example, regularly invest with a savings plan could even benefit from short-term price drops in the medium to long term because they are currently buying more at lower prices. Actively managed funds offer the advantage that investment professionals can keep an eye on current developments and react accordingly.

I have booked a trip to a country affected by the coronavirus. Can I cancel?

If you want to cancel your vacation for fear of being infected with the coronavirus, you have to expect to be left with at least part of your costs. Important: First of all, talk to the provider. Many respond accommodatingly and make rebooking possible, for example. In most cases, however, cancellation fees will apply, regardless of whether it is a package tour, flight, train or hotel. Anyone who has booked their trip individually does not enjoy any superior protection. Here you depend on the goodwill of airlines and hotel operators. The amount of the cancellation fee depends on the booking conditions.

Does my cancellation insurance pay?

In principle, the risk of infection with the coronavirus is not covered by travel cancellation or travel interruption insurance. Even if the customer has booked a trip to a crisis area for which there is an official travel warning, there is no insurance cover, and no cancellation costs will be reimbursed. Insured reasons for withdrawal, on the other hand, are serious illness, accident injury or pregnancy.

I have booked a trip – and would like to take it too. But my airline cancelled the flight? What now?

According to the consumer advice centres, it is currently difficult to assess whether the traveller is entitled to additional compensation payments under the Passenger Rights Ordinance when the flight is cancelled. If the airline informs you of the cancellation of your flight more than 14 days before the departure date, you are usually not entitled to such a compensation payment.

Whether the airlines have to pay compensation in the current Corona crisis depends on whether they can invoke “force majeure”. Airlines are not liable if they can prove that they were not responsible for the cancellation. This is the case, for example, in the event of take-off bans, air traffic controllers’ strike or bad weather. However, it is currently questionable whether the Corona crisis is also included. If not, the airline would have to reimburse the traveller for financial damage caused by the flight cancellation. For example, cancellation fees for hotels, rental cars and booked excursions or concert tickets that expire. According to the consumer advice centres, travellers must allow compensation payments made by the airline to be offset against possible claims for damages.

TRY TO CHANGE YOUR BOOKING

Anyone who gets the message that a flight has been cancelled should contact their airline immediately. Perhaps it is possible to rebook to another flight free of charge, also with another airline or an alternative journey by train? Then the holiday does not entirely fall into the water. If that is not possible, you should contact the hotel and rental car provider immediately to keep the cancellation fees fixer. Collect and document all costs incurred to claim appropriate compensation from the airline.

Due to suspected coronavirus, my children’s kindergarten or school closes for two weeks. Can I stay at home, then?

If the child is ill, it is possible for a short time to care for the child at home. This entitlement is limited to 10 working days per child and parent (single parents 20 working days). If the child is healthy and kindergartens and schools are closed, no parent can stay at home for a short time, provided that no alternative care option is available. In both cases, the employer must be informed immediately. It should be clarified whether home office, reducing overtime or unpaid vacation can be used for this time.

What insurance does the company provide if entrepreneurs have to close their business due to quarantine temporarily?

Official quarantine measures or orders that are explicitly issued against the insured person or the company itself in the event of an epidemic or epidemic are deemed insured events. On the other hand, if the government quarantines a particular region, as is the case in Italy, for example, and the company is located in that region, there is no insured event.

PRACTICE FAILURE INSURANCE

The practice failure insurance offers insurance protection for doctors and specific freelancers such as lawyers or physiotherapists if they have to interrupt their business activities due to quarantine. The insurance covers the fixed operating costs for a period of usually one year.

BUSINESS CLOSURE INSURANCE

This type of insurance pays the event of interruption damage if the company is closed as a result of a reportable epidemic. The duration of the benefit, as well as the amount, depends on the respective tariff or the individual agreement.

IMPORTANT TO KNOW: With existing contracts, companies may refuse coverage for insurance claims caused by the coronavirus. That is because some companies have finally listed notifiable diseases in the terms and conditions, and the new virus is not insured because a notification requirement was only subsequently issued.

PROPERTY BUSINESS INTERRUPTION INSURANCE

There is no insurance coverage through this insurance because the virus is an epidemic and does not pose a property hazard such as fire or tap water.

How to optimize your retirement provision. Unit-linked annuity insurance is becoming more popular, also because the potential for returns is convincing in the current market environment. The public presentation often neglects what other advantages they have. With unit-linked pension insurance, the name says it all: the pension contributions are invested in investment funds. The larger the equity component, the higher the potential for returns. It is true that this also increases the risk of price fluctuations.

But that has nothing to do with the persistently low-interest-rate environment that is currently causing problems for classic, guaranteed interest policies. The unit-linked variant, like other retirement provision products, has other, sometimes too little-known advantages:

  1. TAX BENEFITS: While investors who save directly in equity funds have to pay tax on dividends or realized price gains when switching funds – selling units in the previous fund and buying the new one – the income from unit-linked pension insurance remains tax-free during the savings phase. The compound interest effect is entirely significant.  When they are paid out, the insured also receives a tax bonus if their insurance contract has been in effect for at least twelve years. In this case, they only have to tax half of the income at their tax rate. This is usually significantly lower at retirement age than in working life. Anyone who chooses a lifelong annuity payment instead of a lump-sum payment only needs to set the income portion of the monthly payment, which is dependent on the retirement age, at their tax rate.
  2. LIFELONG ACHIEVEMENTS: Insurance coverage is another argument in favour of unit-linked pension insurance. “On average, people are getting older. Many underestimate their need for financial security. This is precisely where the insurance comes into play: If you choose to pay a pension, the payments are made from the agreed start of the pension – and for life, “says Miriam Michelsen.
  3. ALL-ROUND SUPPORT: The closer you get to the start of retirement, the more critical it is to protect the contract credit you have already earned against possible exchange rate losses. Therefore, it can make sense to replace a riskier asset class like stocks with lower risk asset classes like bonds. If requested, the insurer will undertake the corresponding reallocation of the contract balance into lower-risk funds for the customer. This means that they do not have to follow developments in the markets themselves but can leave that to the professionals.

Relief for Those With Health Insurance. Shutdown, short-time work, loss of profit – due to the pandemic, many people currently have to cope with financial bottlenecks. Of course, nobody wants to risk their health insurance coverage.

The good news in advance: Short-time work does not influence the coverage. For those with statutory health insurance, the protection continues even if work is entirely idle during this time. For privately insured persons, the following principle applies Anyone who was insured in private health insurance before short-time work will also remain in short-time work – even if the shorter working hours reduce their salary so much that they have to (re) insure themselves legally. In this case, the employer’s allowance increases. The burden is reduced to zero in individual cases. In the case of privately insured self-employed persons, nothing changes in the contributions that are due month after month. However, there are ways to reduce them temporarily.

New: Easier Change To The Basic Tariff

For those who are dependent on social assistance due to the current Corona situation, there are now reliefs. Those affected can switch to the basic tariff of their health insurance. This tariff offers services that are comparable to statutory health insurance. However, the problem up to now has been that the insured person could not quickly return to the old tariff. In any case, a new health check is usually due, which may trigger higher risk surcharges. The legislature has now changed that: People with private health insurance who are temporarily in need of help and switch to the basic tariff can now switch back to their original tariff without a new health check if they have overcome the need for help within two years of the change.

Go To The Standard Rate

An alternative is the so-called standard tariff, in every private insurance company offers. This is also a kind of emergency tariff based on the catalogue of statutory health insurance companies. It is often a few cheaper than the introductory rate. The significant disadvantage: You can only switch to this tariff if you were already privately insured before 2009. The return to the original tariff is also usually linked to a health check – at this point, the new law only refers to the basic tariff.

Slimming Down The Existing Tariff

In general, the insured person can also reduce his contributions by taking out a different, less comprehensive tariff from his insurer. For example, he renounces treatment by the head physician in the hospital or the assumption of costs for alternative practitioner services. Here, however, it remains the same: If the insured person wants to return to the full scope later, a health examination is generally due beforehand. However, there are a few providers who, especially in the current situation, do without it or offer other options to lower the contributions, for example, deferments temporarily. It is worth asking.

Insure Legally Switching to statutory health insurance is only an option in exceptional cases. Instead, there must be compulsory insurance in statutory health insurance. This is the case, for example, when receiving unemployment benefit I. Besides, there is age: from the age of 55, a change is generally difficult. In some instances, family insurance through the spouse in the statutory health insurance scheme may be possible. However, the whole matter is very complicated. A decision without advice is difficult for most to make.

When it comes to fund savings, investors can choose between passive (ETF) and active investment styles. We explain the main differences between the two approaches.

The Passive Style: ETFs

Exchange-traded funds, or ETFs for short, are becoming increasingly popular with private investors. The keys to success are the relatively simple design of these funds. The performance of the funds is, therefore, easy to understand because it closely follows the respective index.

Advantages: Since ETFs do not require active management, they are usually cheaper than managed equity funds. Stock selection is very transparent, and ETFs are well suited for passive buy-and-hold strategies.

Please note: The exchange-traded index funds are not the only patent solution for asset accumulation, because an ETF is not only subject to the opportunities, but also to the risks of the respective index—passive investing works particularly well when the stock markets are up for a long time. However, if an index is down, the corresponding ETF follows this path unchecked.

Conclusion: The “passive” investment style using ETFs is particularly suitable for investors who want to participate in the general development of the capital markets – knowing that they can never do better than the market as a whole. Experienced investors, in particular, can use ETFs as a mix when they want to bet on specific markets.

The Active Style: Asset Management Funds

Asset management funds are investment funds that, in addition to stocks or bonds, can use a wide range of assets such as real estate, raw materials or precious metals. Professional fund managers make the selection of investment goals that are suitable for the respective risk profile of the asset management fund.

Advantages: The investor benefits from active protection against market risks. The fund management can intervene in difficult phases on the stock exchange, reduce the equity quota and switch to more promising asset classes.

Please note: Risk appetite and the choice of asset classes for asset management funds depend heavily on the investment philosophy of the respective asset manager. Since the fund’s portfolio can be composed very differently, direct performance comparison with equity funds or ETFs is not necessarily meaningful.

Conclusion: Asset management funds are an ideal basis for long-term asset accumulation. When selecting funds, private investors should pay attention to high management quality and performance over a more extended period of time (at least five years), which also includes avoiding sharp price falls.

Your Risk Appetite Is Decisive

Private investors should decide individually based on their market knowledge, whether active or passive investments represent the right investment strategy. The selection of ETFs and asset management funds should always match the risk appetite and preferences of the investor. A mixture of both worlds can also represent a sensible investment strategy.

Thousands of people soon have fewer monthly accounts due to short-time work benefits and loss of earnings how anyone can cut their budget for a few months.

Potential Savings In Times Of Corona: How To Reduce Expenses In The Short Term

CHECK ONGOING POSTS

The yoga class is cancelled, the fitness studio is closed. According to consumer associations, members do not currently have to pay their contributions. Because of the sports studio cannot offer its service, there is a breach of contract. The Corona crisis is not an extraordinary reason for termination. But until the studios and yoga schools usually reopen, you can leave the contract on hold and do not have to pay any contributions. It is best to contact the provider and clarify the details.

Some fees have to be weighed up: Does the small private ballet school where the daughter takes lessons to have to close if all members immediately stop paying? Or also the private music school? Depending on how tight your budget is (and how long the Corona restrictions will last), everyone has to decide with a sense of proportion whether they should continue to pay for the time being. The same applies to membership fees.

MAKE INSURANCE CONTRIBUTIONS EXEMPT

Should someone run into payment problems with an insurance company due to the Corona crisis, it is generally possible to suspend a contract or reduce the premiums. Different options are depending on the division and provider. However, it does not make sense to terminate existing insurance in a panic, as important insurance protection for risks such as an occupational disability or property damage to home and furnishings is lost. With many insurance companies, however, it may be possible to defer the contributions or give them a limited contribution exemption.

PUT THE SECOND CAR OUT OF SERVICE

If both partners now only work in the home office or hardly have to drive to the employer due to short-time work or childcare, the second car can perhaps stay in the garage for the next few months. The existing motor vehicle insurance does not have to be cancelled to bridge a car-free period. If you deregister the vehicle, the insurance cover can pause, and the contract is made free of charge.

LET OLD-AGE PROVISION CONTINUE

Many companies offer the option of deferring contributions. The contributions can be suspended for a specific time – with the great advantage that the insurance cover remains in place during the deferral period.

An alternative without receiving insurance cover is the temporary exemption from contributions. With many companies, insurance cover can be put back into effect after six months at the latest without a new health check.

OPTIMIZE CONTRACTS

If you switch to cheaper electricity, internet or mobile phone contract provider, you can quickly save a few hundred euros a year. Comparison portals on the Internet help to find inexpensive alternatives for the desired services.

GET TICKETS REFUNDED

Lots of concerts, soccer games and other events were already cancelled in March and for the coming weeks. You can now have the money for the tickets refunded. This is how a financial cushion can be built up. But here too, depending on the provider, solidarity is required: Small theatres and artists, in particular, are struggling to survive due to the Corona crisis.

TAKE A CLOSE LOOK AT BOOKED VACATIONS

Anyone who is in acute financial need as a result of the pandemic should review already booked vacations for the rest of the year – and cancel them in good time. In this way, a financial buffer can currently be built up when advancing payments that have already been made flow back into the account. If your financial situation has relaxed by summer or autumn, you can always treat yourself to a little break in the sun at the last minute.

If you are still unsure how to go on with your annual vacation: Check the cancellation conditions of the hotels, holiday apartments and flights in detail now – and note in the calendar until when a free cancellation is possible. Then you can still make a decision.

CANCEL SUBSCRIPTIONS

In general, now is an excellent opportunity to review all fixed costs. A few examples: Do I still read all the newspapers and magazines to which I have subscribed? Do I use all streaming services such as Amazon, Maxdome, Netflix and Spotify? Some pay-TV providers have offered to reimburse costs due to the Bundesliga break and to suspend the subscription if requested. The pandemic is not a reason for termination.

SUBMIT YOUR TAX RETURN QUICKLY

Take advantage of the long weekends without leisure activities and meeting friends to prepare your tax return for 2019 because many employees can hope for a tax refund, which can bring a small financial buffer for the account.

Make Sustainable, Powerful Investments – After Checking The Facts. Sustainable investments are the trend. MLP selects suitable funds based on what is known as an SRI approach: It shows how recommendable an investment is – ecologically and economically. Sustainability is not a temporary fashion topic, but a prerequisite for economic success. It is just becoming apparent that companies that think long-term can cope better with the challenges of the current crisis.

Sustainability Not At The Expense Of Returns

Good for your conscience but bad for your money? This prejudice persists with some investors. They fear that more profitable companies will disappear from the investment focus because they are sometimes not very environmentally friendly. Susan Dreyer, director of the non-profit organization Carbon Disclosure Project (CDP), sees it differently: “Unsustainable business practices cause operational problems and result in lower profits for companies.” to act sustainably.

Holistic Analysis

Various sustainability ratings, which was co-developed by the CDP, can provide initial indications for selection – but they often fall short. Accordingly, it is not easy for laypeople to find investments that meet not only comprehensive sustainability criteria but also provide attractive long-term performance.

Clear Criteria

In addition to the classic criteria of return, risk and volatility, selection criteria are the so-called SRI properties (stands for social responsibility investment). These take into account that the sustainable orientation of a company does not just result from environmental friendliness – but from the interplay of ecological, social, ethical and economic aspects. The so-called ESG criteria (see below), which are divided into three basic sustainability areas, also appear in the SRI analysis:

the ecological balance of a company [E = Environment],

the social commitment of a group towards its employees, customers and society [S = Social],

the economic basis and compliance with the law. [G = Governance]

This enables a much broader analysis than just a climate rating, for example – and creates the greatest possible transparency for the respective fund.

Offer For Every Type Of Sustainability

Personal advice is recommended to find the right option for your own investment mentality from the growing range of sustainability funds.

What are the reasons for the success of sustainably managed companies?

Companies that take sustainability criteria into account have more practice in managing risks overall. They are also more willing to innovate because they are actively helping to shape the transition to a sustainable economy on their own initiative. A significant point when it comes to sustainability is good corporate management, also known as governance. Companies that people enjoy working for do better. It has always been like this.

Defy The Stock Market Dip With Savings Plans. The current turbulence on the stock markets – triggered by the corona pandemic – is worrying many private investors. Those who invest long-term in funds or ETFs through savings plans can relax and wait for the roller coaster ride. The corona crisis has led to significant price fluctuations in the global financial markets. And some investors need good nerves when they are currently looking into their portfolio. But don’t panic: Anyone who regularly invests in investment funds or ETFs with savings plans, for example, and has a long investment horizon, is well-armed against such rollercoaster rides on the stock exchanges.

The Time Of Entry Is Secondary

Many retail investors worry about missing the ideal timing to invest in their stocks. It would be right for you if you don’t want to invest a large amount at once, but want to invest a certain amount in fund or ETF savings plans every month, you don’t have to worry about the right time to start. Because at the beginning there is little capital in the savings plan. For example, if you buy fund units for 100 dollars every month for ten or 15 years, more units will automatically be purchased when the price is low than when the price is high. This phenomenon is known as the cost-average effect. It also means: With a savings plan, you even benefit from stock market prices that have fallen in the meantime – provided that the prices have risen again at the end of the investment period – because you can buy a relatively large number of fund units for the same money.

In addition, the compound interest effect makes savings plan profitable if income and distributions are reinvested. Perseverance is, therefore, more important than timing when building long-term wealth.

Asset Accumulation: Be Patient

In the current phase of low-interest rates, there are hardly any real alternatives to equity funds, especially for younger savers. Your own risk appetite should always be taken into account; For example, in which the system height is larger or smaller. Because anyone who invests their money in the financial markets has to realize that things are not only going up on the stock markets but also going down in the meantime. The last few weeks have shown this impressively. With an investment horizon of 10, 15 or even 20 years, you can accumulate substantial capital even with small contributions. Savings plans bring a lot of constancy to wealth accumulation – and that pays off in the long term—another advantage: Fund saving is hugely flexible. You can top up, lower or pause the savings rates at any time, invest a more considerable sum in between or have short-term access to capital in the event of a financial bottleneck.

Plan Your Exit Well

When and at what price you sell the accumulated fund units at the end of your savings period, however, has a significant impact on the success of your investment. Ideally, you should therefore gradually move into secure investments in good time before the planned end of the term – if you need the money, for example, for a major purchase or retirement provision.

There are different situations in life in which more money is needed in the short term than the current financial scope allows. Whether for a new car, living room furniture or an exclusive vacation. If you want to fulfil a wish at short notice, cover a few unexpected expenses or have to bridge other liquidity bottlenecks, an instalment loan from a bank can be the solution.

What is an instalment loan, and how does it work?

In principle, most loans can be referred to as an instalment loan or instalment loan. The name only describes that a specific loan amount is paid out and then repaid with interest over a predetermined period. The instalment loan is paid out when all the necessary documents from the borrower have been received by the bank, checked and loan approval has been given. Depending on the lender, payouts within a few days are realistic and, for example, debt rescheduling to replace existing liabilities at lower interest rates is possible.

Calculate the loan instalment: what will the instalment loan cost me?

The costs for a loan include the monthly interest to be paid or the additional costs incurred during the term of the loan, e.g. for special repayment requests. But there are also lenders with free unique repayment options.

Instalments with the instalment loan

The instalments of the loan are made up of interest and repayment payments for the loan amount taken out. The monthly instalment to be paid then depends on the chosen loan term for the instalment loan.

Instalment loan: repayment plan

A repayment schedule helps keep track of current and future payments on a loan. Here it is shown, for example, how high the respective monthly remaining debt is. Banks speak of an outstanding repayment if the repayments are made beyond the regular monthly rate. The option of outstanding repayment can be agreed in the loan agreement.

Additional costs for the instalment loan

Payment protection insurance can make the loan more expensive. This is intended to protect the borrower in the event of unemployment, accident or death. Here they have to weigh the costs and benefits and consider how high the risk of unexpected unemployment is. Often these services are already covered by other insurances.

What do I have to pay attention to with an instalment loan?

There are numerous essential points that borrowers should pay attention to before applying for an instalment loan. A loan is only issued if the bank classifies the customer as creditworthy, but you should also assess your finances yourself.

1. Do not ignore existing liabilities

Are you already using your overdraft facility over a more extended time or are you paying off an expensive old loan? Make sure you get an overview of your current loans before applying for a new one. Especially in the case of the overdraft facility, rescheduling to an instalment loan can often be cheaper. For this, however, the terms of the loan should be carefully considered, and professional advice is recommended.

2. How stable is your financial situation?

Of course, completely unpredictable events can always occur, but to a certain extent, you can estimate your financial stability for an instalment loan. For example, if you have a fixed-term employment contract, you should not take out a loan that is paying off longer than your employment contract is valid.

3. What should the instalment loan be used for?

Even if you do not have to specify a purpose for an instalment loan, you should still consider what it should be used for. A frequent tip from financial experts is generally only to take out planned and deliberately selected loans. Zero per cent financing in the store leads to spontaneous decisions that you later regret.

4. Early repayment penalty

If you want to repay a loan earlier than actually stipulated in the contract, the bank is in many cases entitled to an early repayment penalty. In the case of ordinary instalment loans, the amount of this compensation is set by law at a maximum of one per cent of the remaining debt.

Instalment loan: which term should I choose?

In addition to the general conditions, the loan term determines the amount of the monthly instalments. What should you make the decision about the loan term dependent on?

Duration no longer than necessary

The longer the loan term, the more difficult it becomes to assess financial security. Whether they will have the same job in 10 years is impossible to predict. For this reason, they choose the term of the loan as short as possible.

Instalment loan: term depends on the use The idea here is not to burden yourself with a purchase that is already in the past. A simple example of the term would be a vacation. Here, the repayment term should end as soon as possible after the trip is over.

  • bitcoinBitcoin (BTC) $ 60,617.00 2.94%
  • ethereumEthereum (ETH) $ 2,372.83 2.57%
  • binance-coinBinance Coin (BNB) $ 522.47 4.18%
  • xrpXRP (XRP) $ 1.59 6.86%
  • tetherTether (USDT) $ 0.999941 0.08%
  • cardanoCardano (ADA) $ 1.40 4.39%
  • polkadotPolkadot (DOT) $ 41.68 0.4%
  • dogecoinDogecoin (DOGE) $ 0.270707 110.9%
  • uniswapUniswap (UNI) $ 36.22 2.32%
  • litecoinLitecoin (LTC) $ 275.76 2.5%
  • chainlinkChainlink (LINK) $ 40.43 1.06%
  • bitcoin-cashBitcoin Cash (BCH) $ 889.50 9.7%
  • stellarStellar (XLM) $ 0.600063 3.65%
  • theta-tokenTheta Network (THETA) $ 13.00 8.41%
  • filecoinFilecoin (FIL) $ 184.17 8.86%
  • usd-coinUSD Coin (USDC) $ 0.996926 0.29%
  • vechainVeChain (VET) $ 0.176453 4.69%
  • tronTRON (TRX) $ 0.149566 1.21%
  • wrapped-bitcoinWrapped Bitcoin (WBTC) $ 60,654.00 2.88%
  • eosEOS (EOS) $ 7.50 0.81%
  • solanaSolana (SOL) $ 26.09 1.6%
  • bitcoin-svBitcoin SV (BSV) $ 345.72 5.99%
  • klay-tokenKlaytn (KLAY) $ 2.66 11.29%
  • iotaIOTA (MIOTA) $ 2.34 12.27%
  • terra-lunaTerra (LUNA) $ 16.38 4.83%
  • crypto-com-chainCrypto.com Coin (CRO) $ 0.243782 1.68%
  • cosmosCosmos (ATOM) $ 25.43 4.25%
  • compound-ethercETH (CETH) $ 47.57 2.21%
  • moneroMonero (XMR) $ 325.78 0.03%
  • binance-usdBinance USD (BUSD) $ 0.998304 0.03%
  • tezosTezos (XTZ) $ 7.12 10.66%
  • neoNEO (NEO) $ 77.47 15.19%
  • aaveAave (AAVE) $ 434.25 2.2%
  • bittorrent-2BitTorrent (BTT) $ 0.008090 4.27%
  • okbOKB (OKB) $ 19.42 4.86%
  • ftx-tokenFTX Token (FTT) $ 52.88 5.05%
  • avalanche-2Avalanche (AVAX) $ 34.95 6.06%
  • algorandAlgorand (ALGO) $ 1.47 0.48%
  • compound-usd-coincUSDC (CUSDC) $ 0.021816 0.36%
  • kusamaKusama (KSM) $ 442.75 4.51%
  • ethereum-classicEthereum Classic (ETC) $ 30.58 30.69%
  • elrond-erd-2Elrond (EGLD) $ 218.71 4.09%
  • nemNEM (XEM) $ 0.412792 4.66%
  • huobi-tokenHuobi Token (HT) $ 20.24 2.04%
  • cdaicDAI (CDAI) $ 0.021280 0.54%
  • pancakeswap-tokenPancakeSwap (CAKE) $ 22.59 5.44%
  • chilizChiliz (CHZ) $ 0.623948 17.83%
  • dashDash (DASH) $ 330.20 7.54%
  • daiDai (DAI) $ 1.00 0.03%
  • holotokenHolo (HOT) $ 0.018383 10.78%