Debt rescheduling installment loan
Repaying and rescheduling expensive loans has been a common way to save money on repayments for years. Debt restructuring can be a very worthwhile undertaking, especially now that interest rates on a loan are particularly low. This applies not only to real estate loans, but also to debt restructuring from installment loans. It is also possible under certain circumstances, which we would like to show you here.
When can you reschedule?
Before making a debt rescheduling, you should check whether you have noted this option in your existing loan agreement. Only then is it possible to reschedule the installment loan free of charge. If you are lacking this option, you first need to clarify whether a debt rescheduling makes sense at all. Because the bank that looks after your current loan contract will hold up your hand properly without a corresponding rescheduling clause so that you can make use of this option.
A penalty interest and fees are then due, which together can result in a quite high sum. Fees apply for the early release that the bank charges because it has to terminate the loan agreement. The penalty interest is approximately 1 percent of the outstanding loan amount and is intended to compensate for the financial default that the bank has as a result of the early payment.
Therefore, please first check your old loan agreement for a rescheduling agreement. If this is the case, you can start looking for a new loan. If no debt rescheduling is planned, you must first ask the bank what costs for the debt rescheduling you will face and then see whether you can find such a good offer that also covers the debt rescheduling costs.
When is rescheduling from the installment loan worthwhile?
Debt rescheduling can be particularly worthwhile if you have to service several loans at the same time. Regardless of whether these are classic installment loans, dealer financing or payment agreements of any kind – if you can combine these obligations through debt restructuring in a single installment loan, you will not only achieve interest savings, but will also be able to significantly reduce the monthly burden of repayment.
On top of that, debt rescheduling is worthwhile if you own a very large installment loan with an unfavorable interest rate. Since the volume of the installment loan has already shrunk after a long repayment, you will now have a smaller loan amount that you will need to borrow. Smaller loan amounts mean less risk for banks, which reward them with a better interest rate. It is also worth thinking about rescheduling if the current loan has already been taken out on favorable terms, but the reduced loan amount now enables further benefits to be obtained.
What must be considered when rescheduling the installment loan?
Before you check your old loan and consider debt restructuring, you should know that you can only cancel the old loan once you have signed a new loan agreement. Even if this means that your credit rating may be a little weaker because the new bank can still find the old loan in the Credit Bureau.
However, if you do not do so and cancel the old loan before taking out a new loan, you may not be able to get a new loan and then face a mountain of debt that you need to clear up in one fell swoop. However, since you will not be able to do this without a loan, this situation would lead to overindebtedness and thus to bankruptcy.
Therefore, only cancel the old loan if you have a signature from the bank under a new loan agreement. The bank will then immediately try to repay the old loan and use the money to release it from the new loan. This usually only takes a few days, in which you personally have to do nothing more than wait. Once the debt has been rescheduled, all you have to do is make sure that the following installment payments go to the bank that made the new loan available.