Redeem & repay loan 2019

 Replace the loan early

It happens again and again that a borrower has the opportunity to prematurely repay his loan, or at least partially. If the loan has been concluded at a higher rate than the current rate, the banks lose out on a calculated profit. This loss can be compensated by a penalty, the so-called prepayment penalty. What you need to know if you want to repay your loan ahead of time and how to do it explains this article.

  • Good installment loans provide for annual special repayments without fees.
  • If borrowers want to repay a loan early, a distinction must be made in terms of fees between a classic installment loan and a mortgage.
  • The calculation of prepayment penalties is hardly comprehensible to laymen. The consumer advocates have a rate of over 90 percent in the recalculation in favor of the borrower.

Replacing credit early: Two options

If you want to replace your loan early, this is not complicated in practice. Basically, there are two options: Option One is, you have money available for some reason with which you want to replace the loan. The best way to do this is to call your bank, which has given you the loan. After you have legitimized by phone, you can inquire about the current transfer fee. The employee will give you the sum including any prepayment penalty. You will also receive the information to which account you need to transfer the amount. After that, you can transfer the money there.

Option Two is that you replace the previous loan with a new loan. The best way to do this is to first make an online loan comparison. In addition you give your new offerer in writing the power of attorney that this may take over all steps for you. In practice, you do not have to write a proxy yourself. This is usually included in the loan agreement. That makes it easier for you. Your new provider takes over all the necessary formalities and replaces the old credit independently. Of course you have to provide him with various information, such as contract number and original loan amount of the previous loans.

If you replace a car loan with which the car letter was deposited, this will be sent to you after payment of the transfer fee by mail.

loan prematurely or replace a car loan should therefore calculate in advance whether it is worthwhile or whether the costs will predominate. If an existing loan with higher interest rates is to be included in a new loan with lower interest rates, it therefore makes sense to compare the interest rate advantage with the costs. Only if the interest advantage outweighs the bundling and the existing loan can pay off prematurely.

  • Almost all providers of installment loans give their customers today the opportunity to reduce the loan by a certain amount each year. Through our credit test you can see on the websites of the providers, which conditions underlie the premature termination of the loan. Incidentally, this also applies if you want to replace your car loan.
  • Of course, the best installment loan can only be those who set special accents in the early repayment. 

ING-DiBa credit test winner homepage

At us, you not only receive the best credit, but also make use of annual special unscheduled repayments

Unlike full lending, many banks offer one or more free special repayments per year. Every year up to 50 percent of the current balance can be redeemed free of charge with the current Credit Test Winner. Again, this is one way to prematurely replace a loan – if not completely. As mentioned above, even some credit institutions completely refrain from claiming a prepayment penalty. In part, this is also a discretionary decision of the clerk.

reschedule your loans. Thus, you can save several hundred euros a year.

It can also make sense to combine several smaller loans into one big one. Investigate in your loan agreements and calculate the current interest due on your loans. Then compare the calculated interest rates with other providers on the Internet. If you have found an offer with more favorable conditions then you can start with the rescheduling of your loans. Especially for loans with high interest rates, such as the credit line, it is often advisable to obtain another offer. Disbursed loans are usually burdened with much higher interest rates than conventional loans. Crucial here is whether you drive the bottom line cheaper with a replacement of the previous loan than continue to pay the currently comparable high interest rates annually.

Loose credit: credit line

Loose credit: credit line

As mentioned above, it may make sense to replace one or more disposition credits. Especially since most banks demand very high interest rates. In addition, a credit line should be intended only as a short-term bridging. Persons who use it permanently should think seriously about rescheduling. If you want to replace this type of loan early, you do not have to pay attention in practice. Disbursements are not subject to maturity, so they can be redeemed at any time. Anyone who wants to repay such a loan early, only has to transfer the necessary money to the account, so that the credit line is balanced again. Anyone who takes out a new loan can also leave it to the new provider. You can give this your account number and this will transfer the necessary money there. For your own safety, you can immediately cancel the credit line after the settlement. Otherwise there is a risk that you will take full advantage of it again.

Loose credit: credit card debt

Loose credit: credit card debt

Occasionally, it may happen that one or the other credit card debt would like to replace. More and more people in Germany use credit cards with flexible repayment – similar to a credit line. The advantages of these credit cards are obvious, but if you are not careful, you are faster in the debt trap than you wanted. However, credit cards with flexible repayment do not necessarily have the cheapest borrowing rates. Interest rates around 15 percent are not uncommon. With a sum of, for example, 5,000 euro credit card debt so come together in the year alone about 750 euros interest.

If there is no chance that the amount will be repaid in the near future, you should seriously consider installment credit and replace your credit card debt with another loan.  This is a saving – in the above example – of about 780 euros annually, say 65 euros per month! Replacing a loan or credit card debt makes perfect sense in such a case. It goes without saying that you should not take full advantage of the then released credit line again. You can cancel the credit card, choose the installment to always pay the full amount on a monthly basis, or convert your credit card to a debit card, where sales are debited immediately or once a week from the checking account.

Author: Beulah Weaver