The record low of the European interest rate currently brings low interest rates on loans. But not every borrower benefits from it. For already existing liabilities are often excluded from the boom of low interest rates. Unless you think about refinancing. That brings several advantages. Borrowers can thus benefit from the current low interest rate, get a more attractive repayment plan and at the same time have a better overview of their own financial position.
Replacement of liabilities – Defintion
A refinancing means a replacement of existing liabilities by a new loan. Remediation may make sense, especially in the case of disposition, home savings loan or older loans, if currently low interest rates dominate the financial market. Several loans can also be refinanced to a liability. This not only offers better interest rates, but also ensures an orderly overview of your own finances. However, borrowers should first check whether a prepayment penalty is due on debt rescheduling. This is levied when liabilities are linked with fixed interest rates but are not part of the consumer credit group. These include, for example, real estate loans. A consumer loan, on the other hand, must be redeemed according to EU law without prepayment penalty. However, this does not exclude any fees that may arise from debt restructuring.
Interest conditions, fees and prepayment penalty
First, you should get an overview of existing liabilities. After that, it makes sense to compare offers. Because the conditions for a refinancing are very different. But sometimes it just does not pay off. For example, in the case of a posting control, it is often sufficient to cut the dispensing costs in order to save money. If a refinancing seems to make more sense, the process usually works uncomplicated and fast. Once a favorable offer has been found, existing liabilities are replaced by a borrowed loan. Although it is not in the strict sense a new loan, but there is a credit check. The refinancing of a building loan can be a bit more complicated because they have fixed interest rates. If, as a borrower, you wish to terminate the construction loan before the fixed interest period in order to repatriate it, most banks require a prepayment penalty. In such cases, it is advisable to check whether the sum of compensation nullifies the actual savings through rescheduling. Of course, there are also consumer loans with fixed rate fixation. But after ten years, the borrower can terminate the loan with six months notice and then have it reposted.
Beware of excessive fees
Unfortunately, banks are not always the best friends of consumers. Especially when it comes to fees. According to a study by Test.de many banks require a much too high prepayment penalty. Test.de asked 33 banks for a debt restructuring loan of 100,000 euros with a term of two years. Half of the institutes rejected the demand without consultation or offer. The remaining banks demanded a prepayment penalty of up to 2,000 euros. Even with residual debt insurance, borrowers should be careful. Although banks like to secure it, but consumer advocates see little sense in the insurance. For example, with a loan of 3,000 euros and a term of seven years alone, more than 500 euros can only be incurred for the costs of residual debt insurance.