Borrower’s reminder

Based on the principles of responsible lending, the bank is obliged to draw your attention to the fact that the end of your loan period reaches retirement age and this may involve certain risks, especially with regard to your level of income.

Estonia has one of the lowest pension replacement rates in Europe, which is why there is a risk that your income will decrease when you reach retirement age. As a result, you might find it more difficult to make your loan payments.

What are your options for minimising these risks?

• We recommend that you choose a loan repayment schedule with a fixed principal, whereby the loan principal will decrease faster. The payments of the loan principal to be repaid are equal and the total interest expense for the period is also lower than in the annuity schedule. The distinctive feature of this schedule compared to the annuity schedule is that monthly payments are initially higher and start to decrease as the loan principal decreases, whereas in the case of an annuity schedule, the monthly payments are equal in size. In other words, if higher monthly payments are suitable for you at the moment, you can opt for a loan repayment schedule with a fixed principal.
• Long-term amortisation of loan payments and a low loan balance upon reaching retirement age give you significant financial flexibility that corresponds to the usual changes in lifestyle. For example, by exchanging your current living space for a smaller one before reaching retirement age, you can either repay the loan amount in full or reduce the monthly payment.
• However, if you feel uneasy, considering the risks, about the obligation of repaying the loan after reaching retirement age, we recommend that you take a shorter loan schedule immediately so that you do not have to worry about it later.

Before concluding a loan agreement, carefully consider which payment schedule would be the most suitable for you.
If you have considered the above circumstances, please let us know if you would like to make any changes to your payment schedule that would help reduce your debt burden towards the end of the loan period. We will review both types of schedules together and choose the one that suits you best.