Collective investment scheme

As a repayment vehicle (also called clearing agreement ) forms of savings and investments are designated to be used to pay off a bullet loan. As a bullet loans are referred to loans where the repayment over the entire term of the loan is suspended. There are thus only the loan interest paid, the final repayment is done via the repayment vehicle.

These diverse types can be used by investment opportunities:

• Investment funds
• Stock portfolio
• Traditional life insurance
• Unit-linked life insurance
• Other savings products

The repayment vehicle is completed with the aim to achieve a higher return than to be paid for out of capital borrowed the bullet loan. Thus, the capital increases in repayment vehicle faster than both the principal is repaid.

At the end of the term more capital should be available, as is necessary for the redemption of the loan due in each case. This safety margin should be chosen with 10-30 % in order to prevent unforeseen reduced yields.

Repayment vehicles are mostly long-term investment products with a term of between 10 and 25 years. Therefore, securities can be used with larger ranges of variation, at least for the first half of the time. Towards the end of the term, it makes sense to switch gradually to lower-risk investment options in order to hedge the existing income. It is necessary that possibility into account before choosing a product.

It may be useful at the beginning of the repayment vehicle (for example, 12 monthly installments ) to create a single payment to take advantage of the compounding effect from the beginning. It is useful and possible to besparen a repayment vehicle without a credit debt if you are planning in the near future to make an investment for a bullet loan is to be used. This improves the view at the end of the loan term to have the necessary capital available, as well as the position opposite to the lender. In the case of banks, the selection of the repayment vehicle should in any case be agreed with the consultant.

It is especially important to pay attention to the sometimes hidden costs of the product, which will be deducted during the term. In mutual funds, this is the management fee, in life insurance, the share of insurance costs, fund expenses, and management fees. Depending on the selection of the product and taxes will be due.

Investment funds

• Equity Funds - high fluctuation, good earnings prospects.
• Guarantee Fund - only suitable as a repayment vehicle, as guarantees cost parts of the income.
• Fund of Funds - Additional risk minimization usually costs a considerable part of the income.
• Index funds - when several major global equity indices are used as a base a cost-effective alternative.
• Hedge funds - here resulting in a total loss of the capital, ie only as an admixture (5 - 10% of assessment ) are suitable.

Stock portfolio

Require a great deal of time spent on their care and selection of securities. The tax treatment is disadvantageous compared to life insurance. If a custodian selected with low cost, this is the variant with the highest possible income.

Traditional life insurance

Are these purely based on bonds ( annuity ), the expected yield is not very high. The range of variation is small, depending on the design to not exist. Only suitable as a repayment vehicle, when very low earnings expectations sufficient to repay both the principal. Basically, the life insurance as a repayment vehicle is only recommended when serious tax consequences are to be expected.

Unit-linked life insurance

Consists of shares of stocks and bonds or mixed are here earnings expectations usually sufficient. This election is a tax-efficient, and is usually chosen by financial advisers, since in this way an additional product can be sold with a large bonus for the agent. Here there is usually a way to end the term early withdrawals, or a shift in risk looser bonds or money market funds make. The insurance portion should be set as low as possible for a repayment vehicle since the insurance costs a lot of taxes.

Other savings products

How about insurance savings products, the 10-year savings contracts etc.

Selection

When deciding on a particular type, it is especially important to be clear on the following points:

• Personal risk taking
• Financial situation
• Earnings expectations
• Time required to update the assessment during the term
• Tax situation and tax consequences of choosing a particular assessment

The following example calculation reflects the capital development of a regular monthly deposit of € 100.00 and an interest rate of 5.00 % / pa resist.

Deposits in 25 years:

€ 30,000.00 € 28,823.58 Interest income = gross income € 58,823.58

The compounding effect causes the highest yields at the end of the term. However, a bullet financing with repayment vehicles can only be successful if it is based on average earnings of the repayment vehicle significantly higher than the loan interest for the borrowed capital. It is possible the interest to be paid by means of interest rate caps to hedge a certain level. (for example, a maximum of 3.0 % interest on borrowed capital)

The sale is often not noted accordingly on the risk potential of many fund sectors. It is essential to ensure, as a corresponding Fund may invest and not as the name might seem to suggest policy. The Prospectus can get information about the possibilities as a Fund may invest.

Most repayment vehicles are due to the tax handling to recommend only experienced people in this field. In particular, it should be noted that, for example, in Germany, for some products the capital gains tax in the payment may be due. For inexperienced investors with a professional advice is essential. For investors who do not know that much about their own financial situation, even a professional financial planning is to take into consideration.

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