When arranging flexible repayment loans with the lender, this is often the case when you don’t need a specific amount at a specific time. This is because the lender provides the borrower with a credit line of, for example, USD 20,000 on a credit account, and the borrower can then decide when and how much of the money he needs.
Loans with flexible repayment or framework credit
With such a loan, it is customary that the interest rate is not fixed at the application for a certain percentage for the entire term. Loans with flexible repayment are therefore also called framework loans. The interest rises or falls, but interest only arises if a certain amount from the loan amount made available is actually used by the borrower.
Of course, this interest only applies to the amount used. For example, it may be that the framework loan amount made available is USD 20,000.00, but the borrower only needs USD 5,000.00 at a certain point in time. This amount then amounts to interest at the level that is customary for the borrower at the time of the drawdown.
There are no fixed installments to repay the amount drawn, but the monthly repayment percentage is already taken into account when the loan is taken out and is usually at least USD 50.00 per month. However, the borrower also has the option of repaying the loan amount in one sum.
Loans with flexible repayment are also suitable for real estate financing
A loan with flexible repayment is particularly suitable for this if the borrower expects a higher payment on a certain day, such as from a life insurance policy, with which he can repay the loan in whole or in part. This is because the amount paid is then no longer subject to interest, which is always flexible even with such real estate financing and only relates to the outstanding loan amount.
However, as a borrower, one should always take into account that, if the loan has a longer term, the interest rates may not only fall, but may also rise. You have to take this into account before concluding the loan agreement.