There is not always enough money in the cash register to be able to fulfill every wish directly. Whether it is to set up a kitchen, buy an apartment or build a house – a loan is usually required for such large projects. Borrowing is particularly attractive due to the currently low interest rates in Austria. However, anyone who is still tied to an existing loan with a long term often pays significantly higher interest on the borrowed amount. But even in this case there is a way to benefit from the currently low interest rates: debt restructuring.
What is debt restructuring?
As a rule, debt restructuring can be interesting for borrowers who are still tied to a loan with a long term, but whose loan interest rates are significantly higher than those of the current loan offers. This is often the case for loan contracts with a large loan amount, such as housing loans. As part of a debt rescheduling, the customer takes out a loan from a new bank in order to use this money to repay the old loan.
The amount of the debt rescheduling loan usually corresponds to the remaining debt of the existing old loan, but at the currently low interest rates. For the borrower this often means a large savings in interest, but he should still calculate beforehand.
Attention: prepayment penalty fee
The old lender escapes interest gains through the early repayment of the loan, so he usually demands a so-called prepayment penalty from the borrower. The calculation of this fee varies from provider to provider. In general, this penalty fee is a maximum of 1 percent of the redemption amount. If the prepayment penalty is very high, it may be that a debt rescheduling in spite of interest savings is not worthwhile. This has to be calculated individually from case to case.
If you want to reschedule a loan, you should calculate in advance whether it is worth it. It is important to understand the contractual provisions of the existing contract exactly and to include factors such as annual interest, loan amount and term in the calculation. As a rule, it is also possible to ask the bank how high the prepayment penalty would be for a debt rescheduling.
Credit comparison can save you from making the wrong decision
The cheaper the loan offer from a provider, the higher the likelihood that the rescheduling of the old contract will be worthwhile. Especially with loans with a large loan amount, just a few percent can make a difference of several thousand euros in total. It is therefore particularly important to compare providers with each other. If you use the credit comparison, you can start a search with just a few clicks, which is based on the previously entered personal information.
The more accurate the comparison, the more likely it is that a wrong decision can be avoided, in which the customer pays too much for his loan. Anyone who knows the offers of the competition can also negotiate more attractive terms with the new contractual partner. Because they are usually very interested in winning a new customer.
In the course of the low interest rate phase, some banks also offer an extra debt rescheduling loan, the terms of which have been adapted to the replacement of an existing contract and the creation of a new contract. The prepayment penalty of the previous bank partner cannot necessarily compensate for a debt rescheduling loan.
Does refinancing multiple loans make sense?
Loans are often intended for a specific purpose. For example, a car cannot be bought with a mortgage loan because it is tied to a residential purpose. As a result, borrowers can well end up repaying several contracts at the same time. If the remaining term of these individual loans is rather long, it can make sense to take out a loan from another bank and use it to replace the old contracts loan by loan. This means that all loan amounts can be bundled in one loan. By rescheduling several loans into a single one, bank customers can benefit from:
- Clarity : If several loans are combined in one, the bank customer only has to follow a repayment plan. This creates clarity and can help to organize the finances. In the long run, this can save a lot of effort.
- Interest savings : Instead of paying extra interest for each loan, interest is charged only once for the total loan amount of all loans. This generally makes the loan cheaper overall.
- Reduction of the debt burden : If the new loan is significantly cheaper, the borrower can be relieved of a large burden in the long term.
Those who regularly overdraw the account and use the overdraft facility usually pay high fees. Because especially for bank overdrafts, banks often charge interest that can amount to up to 20 percent of the minus amount. Depending on your life situation, it may make sense to take out a loan in this case and use it to repay the current account credit. In most cases, the interest on loan contracts is significantly cheaper than overdrawing the account.
Only those who are sure should renegotiate
In principle, the replacement of an old loan with expensive interest by rescheduling to a new contract partner can represent a large, financial saving. This is often the case with old contracts with long terms and outdated conditions. Depending on the circumstances, conditions and fees, rescheduling can also cost additional money – and always when high fees are due. Therefore, borrowers should always check carefully and calculate which variant is the cheapest.