Repayment by share fund

Loans – especially mortgages of private borrowers – are not paid off in the usual way by a regular repayment installment. Instead, (share) fund units are purchased month by month. The loan is then repaid at maturity from the capital growth achieved by the fund. – However, if the increase in the value of the fund does not regularly exceed the effective interest rate of the loan, the borrower suffers a loss. If, in addition, the stock market is in a downturn at the time the loan is repaid, the borrower will be in trouble. This means that fund repayment, which has been widely recommended in recent years, entails risks that classical methods of repayment do not. – See insolvency cases, forced convertible bond.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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