Yes, you can repay your loan early. However, the question arises as to whether a prepayment penalty must be paid to compensate the bank for the lost interest gains. There is also the question of whether, at which bank and at what interest rate you can get a newer loan on more favorable terms.
Debt restructuring details and alternatives
Do you have an expensive old loan and want to lower the monthly loan rate? Or, can you no longer easily pay the monthly installments? In principle, you have two options for reducing the monthly charge on your account:
- Extend the term of the existing loan
- Find a new, cheaper loan and reschedule
In the lower section of the article you will also find everything about
- Debt restructuring at a glance
- and our conclusion
Whether such a favorable credit can be offered to you through use of our loan calculator
The banks we offer cover up to USD 65,000 in loans.
If you want to reschedule (mostly) extensive building finance, you will find details and an inquiry form to our experts on our mortgage loan page
Extend the term of the existing loan
In general, there are three ways to change a loan agreement:
- early repayment of the loan amount (a prepayment penalty usually has to be paid, as the bank thereby loses interest gains)
- intermittent suspension of monthly installments
- Extend the term of the loan to lower the monthly rate
The first case is usually not relevant in the event of financial constraints. On the other hand, early repayment makes perfect sense if, for example, one-off income can be used to pay off debts. The second variant (intermittent suspension of installment payments) is only a short-term solution that is not always granted by the bank.
If you want to extend the term, we advise you to contact your bank. The advantage is a usually significantly lower monthly rate. The downside is that you have to spend your income on a loan even longer and pay more to the bank overall. As a rule, banks agree to such a proposal so that the customer does not go bankrupt and the repayment is completely eliminated. However, higher interest and processing fees may apply.
Find a new, cheaper loan and reschedule
Debting a loan is possible. However, a prepayment penalty usually has to be paid. This must be planned in order not to lose money by switching to a new, cheaper loan. Therefore, always ask your previous bank before rescheduling whether a redemption is possible and if so, when and on what terms!
If instead of 4.05%, for example, 4.00% interest can be received, then it is likely that the interest benefit will be “eaten up” by the prepayment penalty. At what interest rate you get a loan, you can calculate with our loan calculator. You can also vary the term to reduce the monthly rate. After approval by the requested bank, you can confirm the payment of the loan and immediately pay off your previous debts.
The current low interest rates in Austria ensure that many old loans can be rescheduled cheaply. This applies to both consumer loans and mortgage loans. The rule of thumb is that debt rescheduling is usually more worthwhile for larger loans with a long term than for smaller loans with a shorter term. With larger sums, a reduction in the loan by a few percent can bring immense financial relief. Savings of several thousand dollars are not an isolated case. However, all costs should also be taken into account here, in particular the aforementioned prepayment penalty.
Debt restructuring at a glance
- Check the conditions of the old loan
- determine the remaining debt
- carry out a loan comparison with the required loan amount
- When applying for the selected loan, name the intended use “debt restructuring”
- cancel the old loan and have a written confirmation issued
- send the newly selected bank the confirmation
- pay the installments regularly to avoid fees
What should be considered when rescheduling?
Before terminating, the conditions of the old loan agreement should be checked. Banks often demand a so-called prepayment penalty if a loan is repaid early. However, there are also loans where there are no fees for early repayment. After examining the contractual conditions, the question arises as to what remaining debt is. Once the outstanding loan amount (and, if applicable, the amount of the prepayment penalty) has been determined, a new loan can be sought that covers the costs of the old one. It is important that you carry out the loan interest comparison mentioned above. For home finance, we advise you to visit our mortgage loan page. Here you will find information on all aspects of mortgage lending and an inquiry form to our experts.
How old are debtors on average?
Debting a loan needs to be considered carefully. The savings in interest must be offset against the costs incurred (in particular the prepayment penalty). In addition, it must be ensured whether the existing loan can be rescheduled at all and, if so, when this is the case. Once you have decided on a loan, you can choose the right term to make the monthly rate affordable.