Would you like to replace an existing loan with a new loan? What are your goals? A complete reorganization of finances or a partial debt restructuring?
We support you with information on your difficult task. Learn what debt restructuring is all about and what mistakes you should avoid.
Repay loan with a new loan – plan debt restructuring
Losing a loan with a new loan sounds very simple in theory. Practitioners know that every loan debt restructuring involves risks. From an economic perspective, not every existing loan is suitable for refinancing. Setting the wrong priorities, despite the lowest interest rates, can lead to the hopelessness of a permanent interest rate trap. It is, therefore, all the more important to take the time to prepare your own debt restructuring well.
When setting priorities, many borrowers only look at secondary goals. You want to lower the interest burden, free the household budget from high installments or just bring “order” to the finances. Every single goal mentioned is important and right. The top priority must always be economically sensible debt restructuring and debt relief that can be achieved in the medium term. All other objectives are subject to these requirements.
Successfully redeeming a loan with a new loan is always the result of some bureaucratic effort. Few credit models are among the basic candidates for any successful debt restructuring. Whether partial debt restructuring or reorganization of finances, short-term loans with high-interest rates are always rescheduled. The overdraft facility and credit card debt are representative of these credit models.
Debt installment loan economically sensible
Installment loans are generally closed in the longer term. They should be designed in such a way that payment in installments can be made without any noticeable “effort”. Nevertheless, the monthly rate must of course not be too low. Interest and repayment must be in line so that the debt is balanced within an acceptable period. What sounds very simple in theory can lead to problems in practice.
If the rate burden has been set too high in the past, the household budget lacks liquidity scope. The bottom line is unplanned additional credit requirements. The expensive disposition seems inevitable. To be able to redeem a loan with a new loan starts all the signs again. The debt rescheduling loan is an independent new loan agreement. Loan amount and term can now be reconciled.
It should be applied for in a sum that covers all liabilities if possible. Installment payments should be calculated so that they remain sustainable even in economic downturns. When taking out a loan, one should not only pay attention to the effective annual interest rates, but also to the loan terms. For example, the right to regular special repayments free of charge allows small current installments and still the quick repayment through special repayments.
Old loans – what is not worth it?
Repaying credit with new credit naturally raises the need to include all existing credit obligations. Nevertheless, the credit conditions and the additional agreements are important to decide which old loan will be reasonably rescheduled. A look at the old effective interest rate shows whether the debt rescheduling loan is more favorable than the old contract.
It is also important to consider whether a clause grants the bank a prepayment penalty. For contracts after June 2010, the prepayment penalty may only amount to 1 percent of the remaining debt. It is also important to clarify whether the old credit was protected by credit insurance. Voluntary residual debt insurance does not appear in the annual percentage rate. However, the insurance contribution is part of the remaining debt.
In contrast to interest already included in the calculation, the insurance premium is not calculated back. Together with the early loan repayment, the insurance coverage is completely eliminated. It is not transferable in whole or in part to the new loan. Given the high cost of credit insurance, no borrower should underestimate the economic loss. About 10 percent of the remaining debt corresponds to the lost insurance premium.
Professional debt restructuring help – debt counseling
Comprehensive debt restructuring can put the family’s economic situation on a sustainable footing. The more components that have to be considered, the more confusing the whole project becomes for the borrower. But there is too much at stake to act lightly.
Professional help for successful debt restructuring, especially in difficult cases, costs nothing and lowers the risk of expensive mistakes sustainably. Non-profit debt counseling centers work free of charge and professionally. These offers should not be confused with similar-sounding offers from credit intermediaries.
The lack of economic independence from the outcome of the proceedings speaks against credit intermediaries as “debt restructuring”. Even a serious broker must feed his family. He can only earn money with free advice if he provides credit. Consulting the result openly hits him directly in his own wallet.
Repay credit with new loan – loan provider
The creditworthiness of the borrower determines which loan providers could finance the debt rescheduling loan. For debt rescheduling with a normal credit rating, free credit comparisons offer a comprehensive range of offers. Debt rescheduling in difficult cases, however, depends on special financing.
Cream bank offers a good contact point for everyone who wants to replace existing loans with new ones. All relevant offers for bank loans can be found using the free credit comparison of the credit portal. Even special financiers for credit requests with poor creditworthiness could be found via the loan comparison. (Temporary credit check).
If bank credit doesn’t work, cream bank offers a comprehensive credit marketplace for private loan offers. Repaying a loan with a new loan is even possible via private investors if bank loan requests fail.