Numerous financial institutions such as banks, savings banks or insurance companies give civil servants cheap loans with a predominantly long repayment term. The term civil service loan is not protected and does not only apply to civil servants as potential borrowers. As a rule, civil servants are also considered potential customers.
Safe work saves money
Civil servants and public employees usually have a secure job. Their regular income is relatively secure over many years. A default risk exists only to a small degree in this group of borrowers. Therefore, financial institutions are willing to grant loans for a relatively long duration and at a low interest rate.
Public servants – from the judiciary, the post office, police and professional soldiers, licensed teachers or civil servants – generally benefit from favorable civil servant loans. Pensioners and officials in the probationary period, as well as academics who have been in permanent employment for five years, are also eligible for favorable civil servant loans. The exact circle of possible borrowers depends on the institute.
Only at the end will be paid
As a rule, favorable public sector loans are granted as maturity loans (term loans). The debt is only settled at the end of the repayment term for this form of loan. During the term, the borrower pays only the agreed interest, which may be fixed depending on the agreement flexible or throughout the term. The loan is repaid at the end of the term by dissolving endowment policies, mutual funds or annuities specifically concluded for the loan. The conclusion of this insurance is part of the loan agreement. If surpluses occur when these insurance policies are dissolved, they will be paid out to the borrower at the end. In this sense, a favorable civil service loan is a guaranteed insurance.
The amount of favorable official loans averages up to 20 monthly salaries. It varies from institute to institute and is definitely negotiable. Most of these loans are granted over a term of up to 20 years, with a particularly good credit rating also beyond. Since cheap official loans are offered at low interest rates, a rescheduling of existing loans offers. Occasionally, this replacement of existing loans is also part of the contract. Currently, interest rates on cheap public sector loans start at around five percent.