Replacing old and expensive loans
Rescheduling of mortgage lending
Especially those who commit to a long-term loan, such as a construction loan, often realizes after some time that the interest rates are considerably higher compared to current loan offers and the credit is thus more expensive. By rescheduling you can counteract this and save a lot of money depending on the loan amount.
Why reschedule mortgage lending?
There are cheap and expensive loans – depending on how high the lending rates are. These can vary both depending on the time the loan is taken, as well as on possible interest rate fixation or interest rate increases in the course of the loan term. Thus, a loan that used to be very cheap can become more and more expensive as the years go by, when the interest rates of the respective bank are adjusted upwards several times. Although mortgage lending is considered to be relatively stable in comparison to smaller loans, due to their long maturity, even small adjustments in interest rates have a significant impact on the overall debt.
But you are not helplessly exposed to this fact as a borrower. With a rescheduling you can replace the excessively expensive loan and convert it into a cheaper loan. Especially with very long-term loans, such a procedure makes sense. Even though the loan was concluded at a time when very high lending rates prevailed, it may be useful to repay the loan if loan interest rates have fallen.
Offers for a rescheduling often come from the same bank, where you have also taken the original loan. Nevertheless, it is worth taking into account the offers of other financial institutions, and only then opting for a cheaper offer, if you save yourself additional costs, such as administrative fees.
How does a debt restructuring work?
Debt rescheduling will start a new loan , usually equal to the residual debt of the old loan. With this loan, the old loan is then completely paid off. Instead of the formerly very high interest rates of the old loan, much lower interest rates are now paid.
For smaller loans, a debt restructuring of the construction financing is worthwhile only if the interest difference is really serious. Because with a new loan also charges, which only lose in importance with a larger loan amount. However, large loans, such as construction loans, can very often be replaced much more cheaply after a few years. Therefore, it is worthwhile to regularly check for long-term loans what the benefit of debt restructuring would be. Especially when the general interest rate level is very low, it often turns out to be more lucrative to replace a building loan.
Runtime change and rate reduction
It is not always possible to change the repayment terms of a loan in progress. Nevertheless, the life situation and the willingness to pay can change so that you as a borrower would like to extend the term of a loan or reduce the monthly repayment installments. Even then, a debt restructuring loan is suitable. Because here you can agree on new terms of payment with a new bank. However, you should consider whether the interest rates for the new loan are still favorable, even over a longer period, and how the interest rate trend is expected to develop.
Change of loan amount
Especially with mortgage lending, it may turn out that the loan amount was set too low. This sometimes means that the construction project can not be realized without additional credit . Sometimes it is advisable not to take additional loans, but instead to repatriate the entire mortgage lending. However, you should only resort to this if you do not miss any interest rate.
Prepayment Compensation on Loan Cancellation
As soon as you as the customer of a bank cancel a loan, a so-called prepayment penalty may become due. This is a charge that you must pay if a loan is repatriated during a fixed interest period. The credit institution may then demand a so-called interest default loss from you, which arises from your termination of a loan. If you receive a prepayment penalty, you must consider the costs involved in planning your rescheduling.
A rescheduling also offers you the opportunity to bring order to chaos. If you have decided on several loans over time, for example, to finance your house and your car, you can combine several loans with a rescheduling. Not only do you benefit from lower interest rates, but you also benefit from a better overview of your finances.
No rescheduling without advice
Debt rescheduling can not only be used to reduce the total debt, but also to tailor the loan agreement to your personal needs. Nevertheless, the rescheduling decision should not be taken lightly. Be sure to seek advice from an independent finance expert . He can calculate exactly with you, from when a rescheduling is really worthwhile, which offer is permanently beneficial for you and how you should start with term and repayment installments.