There are various reasons why bank customers replace an existing loan with a loan. The most common goal is to pay lower interest rates in the future. Another reason is that previous loan installments are no longer feasible due to a change in income situation or increased spending, and the current credit bank does not approve a desired term extension. Occasionally borrowers change their contractor due to dissatisfaction with the current contractor. Debt loans are also advertised with the advantage of merging them into a single loan for currently running loans. However, given that almost all banks are paying off the loan installments, various creditors do not cause significant workloads,
Bank customers who want to replace an existing loan with a loan and thus save interest costs, are in a comfortable situation: If they unexpectedly find no cheaper than the previous offer, they can simply continue the current loan agreement. In principle, there is the possibility of informing the current credit agreement partner about the planned redemption and asking him about a reduction in interest rates, which so far only a few banks enter into.
Can any credit be redeemed?
Whether and on what terms bank customers can replace an existing loan with a loan depends on the loan agreement and the type of loan. In the case of consumer credit, early repayment is possible at any time, whereby the lender may charge legally deferred prepayment interest. Many loan agreements contain the clause favorable to the customer, according to which the bank waives the collection of prepayment interest either generally or with restrictions. The limit on free special repayment may include a maximum proportion of the outstanding loan amount or a maximum number of annual special payments, a combination of both limits is also possible.
In real estate financing, the loan agreement often excludes early repayment. In this case, the customer may replace the loan with a loan only for urgent economic reasons before the end of the contract. A sufficient reason is almost exclusively the mandatory real estate sale before the complete loan repayment.
The process of a loan repayment by a new loan
If bank customers want to replace an existing loan with a loan and save money, they first carry out a savings calculation. In this case, they look at the future lower interest rates and any prepayment interest that may have to be paid to replace the old loans. If the loan repayment is planned due to a mandatory reduction in the monthly loan installment, bank customers can accept a slightly rising interest charge, which is unlikely anyway due to the regular interest rate cuts during the last few years.
In their loan comparison, loan seekers find special offers for debt rescheduling loans, which reduce interest rates on non-earmarked loans from the same bank. This does not exclude that another financial institution, even if it offers no special loans for debt restructuring, the desired loan on more favorable terms and conditions. In addition to bank loans with identical interest rates for all applicants, the loan offer comparison also shows loans with credit-based interest calculation. These offer themselves for applicants with above-average creditworthiness, while lending at fixed interest rates is more favorable for most bank customers.
When bank customers repay an existing loan with a bank loan, the new credit bank transfers the money to the checking account, but directly offsets the existing credit accounts. Thanks to this approach, it is certain that the customer actually uses the loan to pay off old debts and not to increase their total credit line, so that the budget can only be carried out with the new loan amount. Of course, a top-up amount as well as the portion of the new loan determined to offset the discretionary credit will be entered into the bank account of the borrower.
What do bank customers look for when comparing offers for the debt rescheduling loan?
When bank customers repay an existing loan with a loan, they look for the lowest possible effective interest rate of the new bank loan. At the same time they choose a not too short term, so that they can pay the installments even with special expenses from the current income and do not have to resort to the just balanced disposition credit. Ideally, the rescheduling loan will allow for free special repayments without limits, allowing further repayments in the absence of additional costs. Another advantage of flexible repayment thanks to allowable additional repayment without the calculation of a prepayment penalty is that bank customers can once again pay off such credit through a loan if interest rates continue to fall.
Another part of the Flexible Loan Repayment is the right to suspend at a rate from time to time. This agreement facilitates proper loan servicing with high overhead or short-term revenue. More and more credit institutions allow their customers to suspend once a year or every two years of the contract at a monthly rate.