Merging credits and debt rescheduling.
If you want to consider debt restructuring, you can choose from a variety of offers today. Direct banks and the Internet offer a multitude of options, and comparisons can also be called up via the Internet. The most important detail when comparing credit is the effective interest rate. This varies depending on the loan amount and term. So if you are specifically dependent on a loan amount of 20,000 USD and a term of 5 years, you should not carry out the standard comparison with a loan amount of 10,000 USD and 2 years term. Those who value special repayments should also consider this aspect in the condition comparison.
When does debt restructuring make sense?
A large part of our citizens today are over-indebted – over-indebted because they can no longer afford the monthly loan installments, over-indebted because their regular income is no longer sufficient and over-indebted because they cannot be prevented from being over-indebted by rescheduling. Debt should always be rescheduled if you are not already overindebted. Anyone who tries to replace one or more loans with high interest rates with one or more loans with low interest rates or combines a large number of loans into one loan not only structures their financial situation, but also saves costs at the same time. For example, if you use a overdraft facility for a longer period of time, you should switch to an installment loan because of the high interest burden. This installment loan can in turn be shifted into a lower-interest installment loan.
Existing loans or financing can always be replaced by other cheaper loans, different loans can be combined into a new overall loan. For example, loans can be restructured when they are not yet due. Such a restructuring should be carried out if you want to save costs in the future or if you want to divide up your financing differently. In real estate financing, when it comes to mortgage loans, redeployment is often sensible. Especially if mortgage interest rates have dropped significantly since the loan was taken out.
Even borrowers who have a large number of smaller loans often lose the overview, so it can make sense to replace this large number of small loans with one or two larger loans. Such a debt restructuring also leads to a great advantage because of the ultimately lower interest burden. Installment loans among each other can also be meaningfully rescheduled if the interest on the new loan is more advantageous than that of the previous loan. When rescheduling installment loans, the borrower also has the advantage that no fees are due for early termination.
In many cases, many small or medium-sized loans are taken out, which are always different types of financing. Financing for a new car is offered via the car dealer, the new kitchen equipment is financed by the kitchen manufacturer, the large-screen TV or the living room furniture is financed by the dealer, etc. It is not uncommon to quickly “own” a large number of different loans for everyday items things. Hardly anyone keeps an eye on the rate burden, which results from the total monthly. In addition, there are often different loan terms, different interest rates. A rescheduling into a large loan can make sense here, because in addition to the interest savings, there is also an overview. Because now only one loan installment needs to be paid for a loan with a uniform term
The rescheduling of a current account (overdraft facility) into an installment loan
The fact that rescheduling from an overdraft facility to an installment loan seems sensible in many cases is simply due to the type of overdraft facility, a loan that causes the most costs. This makes the interest rates 13 and 15 percent the most expensive loan ever. A current account or overdraft facility is only used to bridge short-term liquidity bottlenecks. However, very few people consider this, so it is mostly used on a large scale for years. However, only very few consider that the high interest charge on the overdraft facility occurs with the quarterly account settlement.
Expressed in numbers, many may become sensitive: a constant overdraft facility overdraft of 5,000 USD is almost normal today. At an interest rate of 12 percent, the bank customer would have to pay an amount of 600 USD annually. If you spread this total over 4 quarters, the interest amount is relatively low at 150 USD each. This in turn depresses customer awareness, you simply don’t notice how expensive the loan is in reality. Debt is also achieved with an installment loan, but – in contrast to overdraft facility – these are continuously reduced with a much lower interest rate. In the above numerical example, half of the interest would have accrued on an installment loan. Extrapolated over 10 years from the overdraft facility 6,000, with the installment loan 3,000 USD. A noticeable difference that perhaps makes the financing of the holiday with this difference unnecessary for one or the other.
Debt rescheduling can be rescheduled relatively easily, since neither deadlines for repayment nor specific notice periods can be met. The customer only needs an installment loan first – either from his house bank or another bank. Only the amount of the loan should correspond to the amount that is in the debit on the account. After approval of the loan by the bank, the money can be paid out in one sum and transferred to your own account. This means that the overdraft facility is balanced again. Now, of course – as with many – the mistake of resorting to the overdraft facility at some point in the future should not be made. Because then, in addition to the overdraft facility, the installment loan also comes into play – a sure way into the debt spiral.
If you reschedule your overdraft facility in order to use it again right away, you are increasing your total loan amount. From a legal point of view, no credit card should be put into circulation in this case. The fact of the intentional fraud would be too large here. Because debts must not be covered again with further debts, since it can be foreseen here that the risk of insolvency would already be inevitable.
The debt rescheduling of a real estate loan
Real estate owners are often forced to reschedule their real estate loans. The reason lies quite simply in the fixed interest rate agreement, which ends again after a certain term. At this point, the financing has to be reconsidered: Should it be extended or should a debt rescheduling be carried out? If money is also due from another source, this makes it easier to consider: there is a real debt rescheduling in which the loan is redeemed early. Debt restructuring is usually problem-free when the loan automatically expires. Something else applies to rescheduling before the previous loan becomes due. Because then you have to calculate exactly: on the one hand, significantly more favorable credit terms must be offered, on the other hand, the borrower is in any case dependent on the approval of the lending bank. This is not an obligation to release the borrower from financing early.
And if approval is given, a fairly high fine is payable: the so-called early repayment penalty. The bank can pay this loss of interest very well due to the premature loan cancellation. Anyone who does not recalculate and compare here will not find that the amount of the early repayment penalty is ultimately much higher than the amount of interest that would have been saved again through a debt rescheduling. The debt rescheduling would have been a loss for the property owner. Here is an example:
Borrowers who cancel their loan before the end of the fixed interest period must recalculate. Firstly, the fixed interest period usually expires 10 years. By paying a prepayment penalty, the bank is compensated for the missing interest, which it can no longer demand after full repayment. When calculating the prepayment penalty to be paid, you take the outstanding interest payments that would have been incurred by the end of the specified credit period. The amount that the bank would have generated with the repaid amount in the period up to the due date is now deducted from this. Reason: The bank either invested the capital from the repayment in securities or borrowed it again immediately.
Anyone who repays their credit and keeps the property has extremely bad cards, because here the bank is free to calculate the amount. Because the property owner unfortunately has no right to cancel a property loan. He is therefore always dependent on goodwill from the credit institution. Of course, the bank will agree to the termination, but in return it can demand the full interest that it has lost due to the early repayment of the loan. The bank does not have this generous option if the loaned property is sold. In this case, the previous owner has the right to cancel his loan early. In this case, prepayment penalty must also be paid, but the amount is limited.