tilgungsfreien

Tilgungsfreien is a term used in finance, particularly in the context of loans or mortgages, to describe a specific repayment structure. It refers to a loan or financial instrument that does not involve periodic principal repayments during its term. Instead, the entire principal amount is typically repaid in a single lump sum at the end of the loan's maturity date.

In a tilgungsfreien arrangement, borrowers generally make interest-only payments throughout the life of the loan. These interest payments are calculated based on the outstanding principal amount. The principal itself remains constant until the final payment is due. This can be attractive to borrowers who anticipate having a significant amount of capital available at a future date, such as from an inheritance, a sale of assets, or a balloon payment from another financial product.

However, this structure carries distinct risks. Borrowers must be confident in their ability to repay the entire principal amount at maturity. Failure to do so can lead to default. Additionally, while interest-only payments may result in lower immediate cash outflows, the total interest paid over the life of the loan can be higher compared to a loan with regular principal amortization. Tilgungsfreien loans are less common for typical residential mortgages and are more often found in specialized financing situations or for certain types of bonds where the principal is repaid at maturity.