Interest rates on loans are currently at a very low level. This is not only pleasing to all those who are currently looking for a suitable loan offer. It also annoys all those who already have a long-term loan, but which has a lower interest rate due to earlier admission. Since interest rates are likely to rise again in the near future, it is definitely worth taking out a loan to repay the loan. Even if the replacement may involve some costs.
Better conditions and lower interest rates
Especially with large loans, it can be very worthwhile to replace an expensive loan with a loan. Above all, when you consider that the interest has to be paid every month anew and can add up to a decent sum over the years. However, if you react now and replace the loan with a cheaper loan, you not only lower the monthly interest, but also automatically reduce the costs associated with the loan. This can sometimes save a few hundred USD.
How does a loan work with a loan?
If you choose to redeem your existing loan with a loan, you should be aware that this will only work if you follow a precise plan. Otherwise, it can quickly turn into a debt trap from which it is difficult to get out.
Therefore, in the first step, look in your old loan contract to see whether early repayment of the loan is contractually provided and what costs may arise. In the case of real estate loans in particular, early repayment is very often agreed in order to offer the borrower the chance of rescheduling. This debt rescheduling can often take place free of charge. Provided, of course, that this was agreed in advance. If you do not find a corresponding passage in the contract, you should inquire with the bank that provided the loan. Ask about debt rescheduling, the costs involved and the amount of the loan that is currently still to be repaid.
You can then use this information to start looking for a new loan. For your selection, we recommend a loan calculator, which we make available free of charge here on the Internet. Simply enter the loan amount that you need to repay the loan with credit into the calculator. Then compare the effective interest rate on the old loan with the potential new loan. If the effective interest rate of the new loan is lower than the interest rate of the old loan, rescheduling can be worthwhile. In such a case, all you would have to do is check whether the possible costs for the transfer do not eat up the savings you will get by taking out a new loan.
Then take out a new loan and then cancel the old loan. It is important that you only cancel the old loan after you have signed the new loan agreement. Otherwise it may happen that you cannot find a new loan and have already canceled the old contract.
Inform the bank of the new loan that you want to use the loan to replace the old loan. The bank will then take care of all the formalities so that you have nothing else to do. You should only change the account number in the standing order so that the installment payments can flow into the new loan on time.