If you want to get out of the current loan with high interest rates, a well-thought-out debt rescheduling is definitely worthwhile. When rescheduling a loan, the main thing is that a borrower can pay off the old loan with the new loan amount and ultimately save money on the new loan thanks to reduced interest rates. Before you make a balanced decision to reschedule after a multiple comparison of the different bank offers, you should first check the following points in detail:
- The applicant has a corresponding credit rating and positive information from credit bureau
- The new credit installments are payable to the applicant based on their income
- The new loan has a lower interest rate than the old one
Provided all the requirements
If the conditions are met, the borrower should find out from his bank thoroughly how best to redeem his existing loan and whether there may be additional costs involved. If you want to cancel your installment loan early, your bank can request the so-called prepayment penalty. This compensation is a form of compensation that is intended to compensate the lender for early loan termination and default interest. The prepayment penalty can, however, be avoided by, for example, requesting a total repayment free of charge from a bank. The exact conditions, whether such compensation is canceled or has to be paid, are stated in your loan agreement.
When is it worth repaying a loan?
It is generally said – whenever the remaining term of the old loan is even longer and when you benefit from lower interest rates on the new loan. If a borrower serves several loans, it makes sense for him to combine all the loans with a debt restructuring – this gives you a better overview of your own income-expenditure situation. In addition, the term of the loan can be renegotiated and extended, which can lead to a lower monthly rate compared to the old loan. Furthermore, you have a good chance of improving your creditworthiness because there is only one credit report instead of several.
The most sensible debt rescheduling is to replace the overdraft facility with an installment loan because an overdraft facility is always associated with very high interest rates. If an overdraft facility has been in use for a long time, rescheduling into a different type of loan will lead to significant savings in interest costs in the future.
If you have a current real estate loan, you can also try rescheduling, because it is about a large sum of money, where each saving can amount to several hundreds of euros. After ten years have passed, borrowers are given the right to terminate the contract (in accordance with Section 489 of the Civil Code) and are allowed to reschedule their real estate loan. However, if you have not yet completed the 10 years, you can still contact your lending bank and try to arrange an early loan termination.
And another tip to apply for a debt rescheduling loan correctly: as the intended purpose, you must select “debt rescheduling” when applying for a loan. Only then will bank employees know that the applicant does not want to take out a new loan, but wants to replace the previous loan. When approving, the bank uses the customer’s income-expenditure situation to calculate whether they really have enough financial resources to pay the monthly installment. And when “debt restructuring” is specified, only the new monthly installment is added to the expenditure.