The monetary policy of the bank has ensured extremely low interest rates for years. It has held the key interest rate at 0.0 percent since 2014 in order to promote investments and enable cheap loans. Not only banks benefit from this, but also private borrowers: the situation has never been so favorable to borrow money. After all, the key interest rate is the seismograph for how expensive your installment loan will be.
If you have older loans, you are most likely still sitting on higher interest rates. You can easily change this with a debt rescheduling loan: You can redeem your existing loan early and reschedule for a cheaper loan. A credit comparison usually gives you a better interest rate that can lower your monthly rate and save you money.
What does a debt rescheduling loan bring you?
To begin with, let’s briefly show how much can actually be saved if you redeem your old loan and reschedule. We demonstrate this using two sample calculations and assume that you took out a loan of 10,000 dollars four years ago with a term of six years and an effective annual interest rate of 6.5 percent.
Determine prepayment penalty
If you want to redeem a loan early, ie before the end of the agreed contract term, you usually have to compensate the bank. Your personal reason, namely to save interest through the debt rescheduling loan, is initially a nuisance for the bank: It saves what you save as a borrower. As compensation, she calculates the so-called prepayment penalty. The consumer credit directive specifies how high this may be.
For loans that were taken out before June 11th, 2010, banks can determine the amount of the prepayment penalty themselves. In this case, a look at the general terms and conditions of your loan or a query at the bank will help you find out how high it is. For all loans that were taken out after this date, the prepayment penalty must not exceed one percent of the remaining debt, and for maturities under 12 months, only 0.5 percent.
From this, the comparison calculation for the loan repayment made above can be completed: One percent of the remaining debt over 7,046.49 dollars would be 70.46 dollars. You would have to deduct this from the 408.09 dollars and would come to a total saving of 337.66 dollars.
When can a loan be redeemed?
Now you may be asking yourself: Is it legally possible to easily terminate an installment loan in the middle of the term? Yes, and for this, too, June 11th, 2010 is a trend-setting date. Contracts that were previously concluded can only be terminated with a three-month notice period. On the other hand, all recent contracts can be terminated at any time without notice under law.
Loan credit: how does it work?
In order to be able to describe in a targeted manner how you can redeem and reschedule your old loans, we must first identify your reasons for doing so. We offer instructions for the following four example scenarios:
- You reschedule an existing loan to a new one.
- You want to replace several existing loans with a new loan.
- You want to relieve your overdraft facility and replace the accrued debts with a new debt rescheduling loan.
- You want to reschedule your mortgage.
The first case is a standard case and the following three scenarios follow it with minor modifications. In each of these cases, it is worth calculating loan interest in advance and comparing the providers.
Debt Rescheduling Tips
We have put together the most important tips on redeeming credit for you again:
- Use low interest rates: If interest rates are low, it is worthwhile to reschedule old loans and thus improve your own financial situation.
- Determine interest savings: Before you redeem your old loan, you should calculate whether you will benefit from debt restructuring.
- Combine several loans into one debt rescheduling loan: If you replace several loans and combine them into one, your credit rating improves.
- Compare different offers: Do not take the first best offer straight away, but compare several loan offers with each other. Not only the effective interest rate is decisive, but also the conditions for the new loan.
- Only take up the required loan amount: If the bank offers you a higher loan amount, check carefully whether you really need it. Otherwise you may end up paying more.
- Check the residual debt insurance carefully: The residual debt insurance offers security, but makes the installment loan more expensive. Therefore, consider whether this is really necessary.
And now – make it easy for yourself: with our specialists for installment loans, debt rescheduling is easy – without additional costs for you. If, for example, your old loans have different notice periods, we will schedule the loan repayment accordingly. In addition, we regularly request feedback from the banks on the current status of processing, ask what transfer fees are already available and pass this information on to you immediately.