By borrowing a loan can save a lot of money, as it benefits from lower interest rates. Especially when it comes to a long-term loan, current conditions often offer better conditions. As interest rates are currently in the basement, financing can benefit. A rescheduling is nothing more than replacing the current loan with a cheaper and new one.
The primary goal is to significantly reduce the repayment burden and protect against over-indebtedness. In addition, interest costs are saved and in addition, the duration can be shortened in most cases.
What needs to be considered?
Before a rescheduling can be made, different loan offers must be compared. Your own creditworthiness plays a major role here. The better the credit rating, the cheaper the offer will end up. Lending is checked in advance in advance, to get the financial institutions accurate information from the Private credit.
In order to be able to carry out a debt restructuring, in addition to a salary statement, a transfer certificate or confirmation from the respective financial institution is required. In addition, it is important to inquire about possible notice periods, if it comes to a premature dissolution. After a legal regulation, for example, installment loans can be terminated after the payment by a notice period of 3 months. Legislators have made it easier for consumers to reschedule and not have to stick to long maturities.
When it comes to loan repayment, it is also important to have the right time, because, for example, in the case of mortgage lending, the agreed interest is often tied to a certain period of time. This can usually take place only after expiry of a debt restructuring. There are no additional costs for the borrower. According to Section 489 of the Civil Code, building loans can be terminated after 10 years, without this leading to a prepayment penalty, even if a significantly longer fixed-interest period was agreed with the respective bank.
A loan reminder is always worthwhile if it is a fairly high amount. Although such a measure may be useful even for small amounts, the additional costs often come into play. Therefore, such a measure is only appropriate in emergencies when the economic existence is threatened.
For example, rescheduling is very well suited to private individuals when it comes to mortgage lending. Due to an existing special right of termination such a process can be carried out quite quickly and without any problems. For an optimal basis for negotiation, it is important to obtain appropriate and concrete offers from financial institutions. Even credit intermediaries can be helpful in such a situation. When it comes to very high sum, even a loan offer, which is “only” 0.1 percent cheaper turns out to be well worth it.
The real purpose of loan debt restructuring is to replace an existing loan with a cheaper one. Thus, the monthly rates can be reduced and the burden on interest rates lowered. Also a summary of several loans to one can be a reason. As a result, for example, the term can be extended and there is some air in the interest payment. In addition, in the end only one creditor must be served and the whole procedure is much easier.
A big advantage, however, is the interest savings, which is very worthwhile for larger amounts. Especially if there is still an old loan that was closed at a time when interest rates were very high. Here can be saved with a clever approach with a rescheduling certainly 2 to 3 percent. This offers a lot of saving potential and the money saved can be used for other purposes.
At the expense of rescheduling pay attention
With a rescheduling of an existing loan on a cheaper, must not be forgotten in any case, the incidental costs, because these can in the worst case properly go into the money. Especially if a loan is to be redeemed early and the bank remains seated on interest income. After all, the money house does not want to lose money, so not every loan can be so easily rescheduled. In any case, the terms of the contract must be studied carefully. Should a rescheduling be feasible, the resulting costs should be calculated in advance. A prepayment penalty or “penalty fee” called, can really go into the money.
Whether the rescheduling additional costs incurred and how high these fail in the end, decides the bank. Some banks are quite accommodating and agree to such a measure, while others agree to a free rescheduling only after the expiration of the notice period. Thus, a premature release of the loan can only be carried out with additional costs, namely a prepayment penalty.
It should be noted, however, that even with the new bank by taking a loan may incur costs. Because here it is possible that the money house for the acquisition and processing of the existing credit requires a kind of processing fee. These should be included in any case and can make the actual project more expensive. Therefore, rescheduling makes only sense when the overall cost can be reduced.
If the monthly income, for an existing loan, is insufficient to cover the installment payments, it may also make sense to extend the existing loan, as this can reduce the financial burden. It is not always worthwhile to remortgage loans, as there are often hidden costs that can not be recognized at first glance.
If the borrower has remaining funds available, he can use them through the use of a special repayment. Most loan agreements include such a clause, so that once a year a certain sum or percentage of the loan can be brought in as a one-off payment. As a result, the loan amount is reduced significantly and the term can be shortened.
As a further effect, the interest payments can be reduced, which makes the loan cheaper in the end. In the case of rescheduling, special attention should always be paid to a special repayment right, as additional income for early repayment can be brought in here.
In order to successfully complete a loan rescheduling, sufficient information about the existing loan must be available. This is the basis to compare other loans to find the cheapest offer. If a suitable financing was found, still some steps are necessary.
If the interest rate commitment on the current loan has not yet expired, it requires a premature termination of the existing contract. Such a termination is in most cases also recognized by the respective bank, but this requires a prepayment penalty, then this would like to offset the lost interest income.
After expiry of the fixed interest period, however, the loan can be terminated as normal and the existing balance be taken along to the new provider. Once the new loan agreement has been signed, the repayment can be made using the new and improved terms.
Bad credit rating
With a bad credit rating or a negative Private credit entry, a debt rescheduling proves to be problematic, because finding a new provider here, which takes over the existing financing on favorable terms is very difficult. In some circumstances, an independent financial adviser who knows reputable companies performing such a measure can help.
Otherwise, there is the possibility to look for a guarantor who will pay the installments in case of default. It is best to have a close friend from your family or friends. This significantly increases the chances of finding a financial institution that performs the loan debt restructuring. However, the guarantor must sign with contract and thus also be included in the liability.
Future interest rate developments
At present, the interest rates on loans are at a historically low level. The money houses are undercutting the conditions. As long as the European Central Bank does not change its current monetary policy, interest rates will likely remain in the cellar in the medium term.
This is certainly positive for borrowers, but it also seduces to carry out large financings that actually do not fit into the budget. Therefore, a borrowing in advance should always be very thoroughly calculated so that your own existence is not at risk.