Loans are something completely normal today. While our grandparents still lived with the idea that you should only buy things if you saved long enough for them, the changed monetary policy of the Best Bank) in recent years has also led to a rethink in Germany.
Because it is cheaper than ever to take out a loan today. Saving money, however, hardly pays off anymore – there is almost no interest on a classic savings book, and call money accounts also come with very low interest rates. It is no wonder that buying on installments is more modern than ever.
But even though loans are generally very cheap today, not every loan offer has to be equally good. Some car loans that you may have taken out in the past few years would have been better with a loan comparison here on Capital Lender. The overdraft facility, which many consumers still use, is also a very expensive way to borrow money. Fortunately, today, you can escape expensive loans relatively easily – by simply debt restructuring.
Debt restructuring is modern – but does it always make sense?
The short answer is: No. It does not always make sense to repay a loan. In principle, rescheduling means nothing more than taking out a new loan to replace an old loan. Only if the new loan is cheaper than the old loan does this really lead to savings and is it worthwhile. It depends on the interest rate that is offered to you.
Capital Lender Tip: When making a loan, pay attention to the general conditions. Do you have to take out residual debt insurance for the loan so that the bank approves the lending? This will cost you additional money. The sum of the residual debt insurance is added to your loan as a loan amount and is paid in one sum when the loan is paid out to the insurance company. This increases your monthly burden, even though you have never held the money for the residual debt insurance yourself – on the other hand, such residual debt insurance can be important if you are not otherwise covered, for example by good life insurance.
For example, if you want an old loan with a loan amount of $ 20,000 that is open and comes with an interest rate of 5%, an offer with 4.5% interest seems good at first glance. However, if you have to take out residual debt insurance in order to receive the 20,000 USD, for example with 2,000 USD, the new loan amount increases to 22,000 USD, which of course can also mean that the burden is not noticeably reduced even with a lower interest rate.
Ultimately, the most important thing about debt restructuring is that the bottom line is that the terms of the new loan are cheaper than the terms of your previous loan.
In which cases can you generally assume that debt restructuring makes sense?
At Capital Lender we have put together three situations in which rescheduling definitely makes sense. Basically, it is best to take a look at our loan calculator in these situations and check the best loan offers for a debt rescheduling loan via the loan comparison here on Capital Lender. The result may actually surprise you in the following situations:
- For loans with interest rates dependent on creditworthiness in the event of an increase in income
- If your loan has been running for a few years
- In the event of a general fall in interest rates
1) Has your income increased?
This can be particularly noticeable if you previously had a loan with interest rates that depend on creditworthiness. Because these are inherently dependent on your monthly income. The higher your creditworthiness – i.e. the financial resources that are available to you each month – the lower the interest rates that depend on creditworthiness.
So if you took out a loan when you were the sole earner and your partner now also has a job, or you or your partner have received a hefty salary increase, this usually leads to a higher credit rating. This in turn brings you cheaper interest rates. A credit comparison is definitely worthwhile at this point.
You can also increase the credit rating with another borrower. Read the following article in the Capital Lender guide.
2) Have you been paying off a consumer loan for several years?
Most consumer loans are annuity loans. This means that at the beginning of the loan term, a rate was calculated that is based on your repayment rate and your original interest rate. The actual level of interest rates has two causes in most cases:
- Loan term
Capital Lender Tip: An exception to this rule are loans with interest rates that are independent of creditworthiness. These have a fixed interest rate – regardless of your income. With top earnings, you are better off with a credit-dependent loan. With a medium or low income, credit-independent loans are generally cheaper.
If you now take out a loan of 15,000 USD with a term of 10 years, interest rates of around 8% are perfectly normal for a traditional house bank. This means that in addition to the necessary repayment, you will initially have to pay interest of $ 1,200 a year. This can quickly result in a monthly rate of around 180 USD.
If you have already paid off your loan for four years and still have a remaining debt of around 10,000 USD, in the event of a debt rescheduling you have the chance to get a lower interest rate over the term. If you set the new term to 6 years and thus achieve a reduction in your interest rate, this automatically leads to a reduction in the total rate that you have to pay each month.
3) Interest rates have generally changed
Interest rates have not been falling for a few years now, but have moved more sideways – that is, there are hardly any noticeable changes. This is ultimately due to the fact that an interest rate low has now been reached that can hardly be undercut. The Best Bank’s monetary policy has made this possible – there is no prospect of a change in this policy.
But if you took out a large consumer loan five or six years ago and set it to ten years, you took out money at a time when interest rates were higher than today. A comparison of the current interest rates for a debt rescheduling loan therefore definitely makes sense.
By the way:
If you have taken out a consumer loan with your house bank, it is generally advisable to check the offers for a debt rescheduling via the loan calculator on Capital Lender. In many cases you will find offers that are far better than those offered by most house banks.