There can be several reasons why borrowers choose to have a loan replaced with credit. Usually, however, it is the more favorable conditions that other offers have on the market. Whether the rescheduling is worthwhile for another loan is not always clear. A lower interest rate is not the only decisive factor for the decision.
Replacing credit with credit: important factors
Before it comes to having a loan replaced with credit, the conditions should be scrutinized. The most important comparison feature is certainly the interest rate, if not the only one. The effective interest rate should always be compared since only this can give an idea of the total cost of the loan. Here further cost-relevant factors such as discounts (discount), processing fees as well as duration and installment amount are included. In any case, the bank should be informed that the loan requested is intended to be used to repay a loan with credit.
But that alone is not enough. Now, the already running credit must be considered again. Banks usually have to pay a bit if the loan is settled ahead of time. This is also referred to as a so-called prepayment penalty, because the interest income calculated by the banks diminishes in the event of premature repayment. These compensation fees must be included in the bill to find out whether a change in the loan offer is worthwhile.
Further advantages of a rescheduling
In addition to saving interest, however, rescheduling can also have very practical reasons for replacing an existing loan with credit. If several loans run parallel to each other, they can be combined into one. This saves work and makes your own budget planning much easier. But again, it is important to compare in advance exactly what fees are due for the change. Remaining maturity also plays a role here, because the shorter it turns out, the less debt restructuring is possible.
However, having the credit replaced with credit can also have the advantage of lower rates. Because by the new borrowing, in which all previous loans are summarized, also brings the possibility of longer maturities with it. This results in lower rates and at the same time a lower burden on one’s own budget. Lower rates and more clarity – so should a rescheduling ideally go out.
Above all, consumer and credit loans can often bring high interest savings. In the case of credit facilities, the prepayment penalty is also completely eliminated because the customer is free to decide at what intervals he will repay the loan and what amounts. The disadvantage of the Dispos are the associated high interest rates. Once the credit line has been exceeded and the checking account has been overdrawn, rescheduling via a normal installment loan can even be urgently required to avoid interest rates beyond the 20% mark, as is quite common in some credit institutions.