What is the redemption value?
The redemption value is primarily associated with leasing transactions. Here the redemption value is the residual value that the leased asset still has at the end of the term. The residual value is the value at which the lessee can take ownership of the leased asset at the end of the lease term. The amount of the residual value is determined when the lease is concluded and recorded in the lease. However, during the term of the lease, a number of circumstances may reduce the value of the leased asset and thus become to the detriment of the lessee. At the end of the term, the lessee has the option of replacing the leased asset or reselling it to another person.
However, the redemption value has a significance in the area of loans.
Save on installment payments in the lending business
The redemption value is also a term in the credit business, but has a somewhat different meaning here and plays a role in the redemption of loans or in a rescheduling of debt. In a loan redemption, one or more loans from one or more borrowers can be combined into one larger loan.
Borrowers therefore opt for rescheduling or redemption because this offers some decisive advantages. On the one hand, a better overview of the financial situation is provided and, on the other hand, the costs of repaying the loan are reduced, as the amount of interest due each month is reduced and the volume of instalments is also reduced. In most cases, the duration of the repayment period is also shortened. Before a transfer can take place, the borrower must submit an application to the lender. In the course of the negotiations, the redemption value will now also be negotiated.
Composition of the
The value of the redemption value is a calculated value and indicates how much something is related to a certain is still worth during the term of the contract. The transfer fee consists of various things. This includes the current residual debt as well as the interest accruing up to the desired date of redemption. However, the redemption value may also include possible processing fees as well as administrative fees incurred by the current borrower. Some credit intermediaries also demand an early repayment fee. This is the case with many credit intermediaries when a loan is terminated prematurely. The calculated redemption value is paid by the bank which takes over the loan or loans. Without collateral, the loan can be repaid quickly, easily and unbureaucratically.
loan collateral
The collateral should also be taken into account when repaying the loan. These are assets that are intended to ensure that the borrower can repay the loan at the accrued interest within the agreed period. Many lenders require collateral if they consider the granting of the loan to be risky or if they have to fear that the borrower will not be able to repay the loan due to insufficient creditworthiness. The loan repayment with collateral takes more time and is not so unbureaucratic. In the case of collateral, not only the redeeming lender must become active, but also the original lender. The new borrower replaces existing liabilities and receives the collateral from the old borrower. The old lender only receives the redemption value if he transfers all of the collateral to the redemption bank. If it is not possible to transfer the collateral, the old lender does not receive the redemption value and the redemption of the loan is deemed to have failed.