Credit agreements are often concluded with terms of five, six or more years. A lot can happen in a relatively long period like this – not only in your own life, but also on the capital markets.
If the interest rates agreed years ago are suddenly far too high by today’s standards, rescheduling can be the solution. Expensive old loans are “exchanged” for cheaper new loans.
So it was in recent years: The interest rates experienced a rapid decline. As a result, investors achieved only a mini-yield with their savings, borrowers could suddenly realize unexpectedly favorable financing.
The problem here: The attractive conditions were and apply only to new contracts. Anyone who has taken out a loan two, three or more years ago, looks into the tube. Because he must continue to pay the high interest rates that were agreed in the loan agreement. On the one hand, fixed interest over the entire term offers the borrower planning security – on the other hand, he does not profit from falling interest rates.
Germany’s biggest loan advises: Instead of getting annoyed about too high interest rates on your old loan, you should consider the possibility of a loan repayment. What does that mean? Quite simply: You get a new cheap credit to pay off the expensive old loan in one fell swoop. And often you even have the option to transfer an additional amount to the account. This extra payment is, so to speak, your reserve for unexpected expenses.
Therefore, a loan repayment is attractive
If you were to pay off your expensive old contract until the end of the term, you would have to – depending on the loan amount – transfer several hundred or even a few thousand euros too much to the bank. By canceling the old loan and taking out a new loan, you instead secure the current low interest rates. Even if you have to pay a “prepayment penalty” at the old bank, the replacement is worthwhile in most cases.
As a result, you immediately lower your loan installments, gaining new financial headroom month after month. In addition, of course, the total cost of your financing fall.
Another advantage: As part of a loan repayment, you can repay not just a single old loan, but several. So they summarize the existing payments and henceforth no longer need to transfer installments to different banks.
When is a replacement of old loans useful?
A loan repayment is often useful, but not always. These two factors should be given:
- The old loan will run for another year or more.
- The difference between the old and the new monthly installments is 10 euros or more.
Another important aspect is the “prepayment penalty”, which can amount to between 0.5 and a maximum of 1 percent of the remaining debt. This extra fee, which is often due to the old bank under the loan agreement, should not be forgotten in your calculation.
The 3 steps to credit
Determine residual debt
So that you know what sums of money are involved, it is necessary to determine the remaining debt at the old bank or the old banks. If the residual debt is not reflected in the loan agreement at the current time, have the bank send you a current credit statement. If you want to combine several old loans, add the respective remaining debt. So you get the sum that you need to refinance.
Get the loan offer
After you have determined the remaining debt, you know how much fresh money you need. This results in the sum for your new loan request. Our tip: Often it is easily possible to increase the loan amount, for example, by 1,000 to 2,000 euros. You will then not only get the money you need to replace the old loans, but also a “buffer” on the account.
Eliminate old credit (s) in one fell swoop
If you have your loan offer on the table and want to accept it, all you need to do is to return the signed loan agreement. The banking partners of Bon-Kredit initiate everything else. Your old loans are paid out in one fell swoop, the rest of the money goes straight to your account. From that moment on, you no longer need to worry about the high interest rates on your old contracts. They now benefit from the currently extremely favorable interest rates and save money each month.