The essentials in brief
- Rescheduling often makes sense because of the savings
- In the case of credit debt, you benefit from the currently low interest rates
- Opt for the new loan to best suit your needs
- Early termination of a current loan may incur costs
- A rescheduling uses your own financial overview as well as the creditworthiness
- Re-debts are worthwhile from an interest rate difference of 1 to 2%
By taking out a new loan, you can really save money. That sounds strange at first, but it is true in many cases. They use a single loan to settle all previous liabilities and, as it were, put several construction sites together to form a single one. Such rescheduling is by no means a completely new idea, but one of the most common uses of credit in Germany. The method pays off due to the lower interest costs. These are currently at a historic low and therefore you can save money by rescheduling. The number of your current liabilities does not matter. Nevertheless, it is important for you to consider a few aspects of debt restructuring. What the loan repayment process is all about in detail for you can be found in this article.
That speaks for a rescheduling
You may be burdening credit on your past for a variety of reasons. Even if you borrowed money from the bank years ago at very favorable conditions, it will have been much more expensive than it is today. A medium-term loan yielded an average interest rate of around 6% 10 years ago. Under current conditions, you can use our credit comparison to conclude cheap loans in excess of € 10,000, which will burden you with an effective interest rate below 2%. The exact interest rate is based on your credit rating as well as the total term. If you repay all outstanding debts at once with a single loan, this has advantages. In addition to the lower interest burden you benefit from other effects.
Saving on interest
When it comes to loan repayment, the focus is first and foremost on improving the interest and repayment costs in your favor. With interest, the lender achieves his profit and you have to carry this effort as a borrower always. So, if you’re paying down on past liabilities, your lender will probably make a lot more money than freshly lent money. Older loans for a training, the purchase of your car, furniture or other more cost the bottom line so unnecessary money. A large part of this can be saved after the rescheduling. Check your current loans for incidental costs as well as the individual terms. A simple calculation example illustrates your cost advantages when you combine several loans into one:
|credit volume||borrowing rate||annual interest costs|
|New loan for debt restructuring||10,000 euros||2.5%||250 euro|
|1. Old credit||2,000 euros remaining debt||5%||100 euros|
|2. Old credit||5,000 euros remaining debt||6%||300 Euro|
|3. Old credit||3,000 euros remaining debt||4%||120 euros|
|Old loans together||10.000 Euro remaining debt||520 euros|
Before the rescheduling you had for your entire remaining debt in the amount of 10,000 euros very simplified summarized an interest burden of 520 euros annually. Compare this burden with the interest cost of getting a new loan on the current favorable terms. In the example, you pay 270 euros less repayment costs per year. You can use this amount as a special repayment installment, for example, or treat yourself to a short break.
Good for Dispo and creditworthiness
If you have just thought about your outdated installment loans, you should not forget a particularly convenient credit card of your everyday life. As a rule, the credit line of your checking account goes into the money. While the credit interest in the current account moves around the zero point, slipping into the dispo can still easily cost a double-digit debit interest. If you repost the loan, you can easily turn off that cost scavenger. Apply for a new loan, a sum that covers not only all residual debt. The new loan amount for rescheduling should also compensate for the shortfall in your checking account as well as your credit card account.
Rescheduling also improves your credit rating. By paying off only one liability in the future, your statistical default risk will be reduced. In return, it is considered riskier if you need to service a variety of loans at the same time. Paying back the money to repay the loan regularly and on time, increases your long term credit rating. Credit bureaus like the credit bureau work with banks and other lenders to get an idea of your financial affairs. If you regularly use and exhaust your collection, this can affect your credit bureau score. A single loan is generally more positive on your score than if you have multiple borrowings side by side.
More overview and comfort
The lower cost burden of the debt restructuring comes the argument of a better overview. Since instead of having several smaller loans you will only have to serve something bigger in the future, you are better off. Your attention is only one rate that you pay back monthly. This automatically brings more predictability and helps you keep an eye on your finances. You no longer have to deal with different installment levels, repayment terms, interest rates and payment terms. Instead, you simplify your finances by combining everything into one loan. For example, this makes it easier for you to set savings targets, or it makes it easier for you to change your account.
Another benefit of loan repayment is that you can choose the new loan terms that best suit your current life situation. This means that you determine the term along with the repayment installments according to your ideas. Under certain circumstances, you benefit from the provision of security deposits or the choice of higher monthly installments of particularly favorable interest rates. On the other hand, if you value a lower monthly charge, you can opt for a long term. At the same time you secure the currently low interest rates on your loan.
A debt restructuring loan can also give you options that you might not have had before. In addition to the long-term fixed interest rate, you should especially keep an eye on earmarking and the possibility of special repayment. The latter will help you get off your debt faster. Unscheduled payments allow you to pay off your loan debt beyond the monthly installments. The lower your residual debt, the smaller your interest charges automatically become. With the earmarking you can hope from the outset for slightly better credit conditions. Lenders grant these benefits in many cases when they are aware of the purpose of the money. When it comes to rescheduling, ultimately, you do not increase your debt by the amount of the new loan, but use the amount for quick repayment. Your debt remains almost the same, they just relocate it. Always check loan offers for specials like these and in all cases make sure they do not incur any additional costs.
What to pay attention to when re-crediting
The application of money to repayment does not last long. However, you will need to get a detailed overview of the terms and conditions of your current loan obligations in advance. To get rid of old loans, there are deadlines, which are usually coupled with the fixed interest rate. Find out about the applicable rules to avoid cost traps. In addition, of course, it is also important that you do not just vote for the new loan in height. He also has to fit in with you in every detail. If you misjudge this, it can lead to over-indebtedness in the worst case scenario. Then you would have achieved exactly the opposite of what you originally intended.
What counts when canceling the old loan
Re-debts are worthwhile even if there are few distinguishing features between new and old loans. Even if there is something more important to you than your current loan, you should ask for the details here. Above all, residual debt and maturity, but also the interest rate are crucial. Starting with an interest rate differential of 1 to 2%, it is worthwhile to repay an old loan. Calculate how long you still have to pay installments based on the current remaining debt. How much does that mean for you in total? Pay that amount towards the cost you would pay for your new loan.
If your “legacy” is a loan with a very low residual maturity, the re-lending is unlikely to pay off. In general, a termination of the old loan makes sense, if it runs for about 6 months or longer. You should consider this time frame just because you need the money to replace the effectiveness of your termination. Application, processing and deployment time, notice periods and other time factors must be considered.
The terms of notice apply depending on the type of your current loan. A 6-month lead time at the end of the fixed interest rate must be taken into account for fixed-rate installment loans. This fixed interest period is often 10 years, but may be longer or shorter. This credit model is mainly because often the high interest rates from the past can be found there as a cost driver. If you want to replace such a loan with fixed interest early, you can incur compensation costs. The lender then demands a so-called prepayment penalty from you, as you are virtually eliminated “overnight”. Although you settle your remaining debt in one fell swoop, your creditor loses the interest earned for the remaining term.
For loans with variable interest, the simple 3-month notice period applies because there is no fixed interest period. Despite the promise of flexible interest rate adjustment to the market, the comparison with current credit offers is also worthwhile. By adhering to the deadline in principle no compensation costs. The same applies if you want to cancel a home savings loan before maturity and repay it completely.
The compensation payment may be requested by your old bank upon termination within the applicable fixed interest period. However, some vendors do without it, even though they lose you as a repaid premature. When it comes to the early redemption of a loan that was concluded after 11 June 2010, clear rules apply. The prepayment penalty may not exceed 1% of the outstanding loan amount . Older loan agreements usually have other arrangements in the event of replacement before expiration. If you are not sure what costs you will expect, a special calculator will help you, which you can find here.
You can avoid the claim for compensation in the event of early termination of a loan in exceptional cases. However, this is usually only with the expert support of a lawyer. In such a case, you must prove to the bank or lender that you have not been sufficiently informed about the conditions of the revocation when concluding your old loan agreement. If the corresponding clause in your credit agreement is inadequate or incorrect, you are entitled to terminate the loan at any time prior to expiration. Of course, you then have to settle the remaining debt. However, there is no compensation for your debt rescheduling and you do not need to wait for the end of the fixed interest period.
Face all costs
To help you determine how and whether it is worth doing the debt restructuring, you should go through the following steps. First, take all the documents on the current loans at hand. Review the items below for each individual loan and at the end count the total cost together.
- Check how long your old loan is still running.
- Calculate the annual interest and repayment costs for your normal repayment behavior.
- Calculate these costs for the remaining term, a remainder calculator can help you.
- Check in the fine print whether compensation claims are made if you replace the loan early. If so, include this as a one-time effort.
You will receive an amount that you will have to pay off in the future. This consists of the actual remaining debt and the incidental costs of the loan. At the latter you can start by rescheduling to save money. With these values, you are well prepared to look around the offers on the credit market for rescheduling.
Alternative to rescheduling
Even current loans usually offer you a certain flexibility. Optionally, you may be able to change a few variables in your residual debt calculation. If your contract has options that entitle you to special repayment or installment increase, you could use it purely computationally and compare again. With a low residual maturity, a different behavior when repaying existing loans may be an alternative to rescheduling.
This is how you can repost your loan
Since the financial market is not a static system, comparisons are always appropriate. Especially if you are looking for a loan to reschedule, you can expect almost daily with new loan offers. In our credit comparison you will find the most up-to-date and at the same time cheap lenders. In addition to the interest rate, you can also include parameters in the loan, which tailor the offer especially to your needs and ideas. After all, a debt restructuring will normally pose a long-term financial burden for you. The better you make the selection, the more convenient you will make the future commitment.