Low key interest rates, unfavorable credit conditions or simply better competitive offers - there are a few good reasons to pay off a loan. You can save a lot of money as a borrower. As a rule of thumb, the earlier you pay off your existing loan, the more you can save. However, some banks require prepayment penalties if you want to redeem a loan early.
In the current low interest rate environment, lending rates are also very low
If you want to redeem your old loan early, you can save a lot of money
Installment loans can be redeemed at any time without notice
Anyone wishing to redeem a loan must take into account the bank's right to a prepayment penalty. Otherwise, the loan exchange can be expensive.
What is a loan repayment?
Anyone who wants to redeem a loan carries out a debt restructuring. One or more current loans are paid off prematurely and the remaining debt is paid through a generally cheaper loan. The new loan is often taken out at another bank. However, an internal solution can also be found and the old loan can be replaced with a new one at the same bank. You can easily find the right loan for you using our loan calculator from Good Finance.
If the interest savings of the new loan are greater than the costs and fees of early repayment, the change is worthwhile.
In this respect, a comparison of all conditions, especially in the case of early loan repayment, is very important in order to determine the savings option.
The difference between loan repayment and special repayment
Loan repayment: As already described above, in the event of a loan repayment, the entire remaining amount is paid off with a new loan.
Special repayment: In the case of a special repayment, on the other hand, an amount of money that exceeds the agreed monthly rate is paid to the bank in order to partially repay the remaining debt from an existing loan.
However, there is often a connection between taking out a new loan and the special repayment: A new, cheaper loan is taken out in order to replace the old loan with the new loan. The redemption - that is, the repayment of the old loan debt - takes place in the form of a special repayment.
When is it worth repaying a loan?
In principle, it is always worth repaying a loan if the terms of the new loan are more favorable than those of the original loan. In low interest rates in particular, it is often worthwhile to take a closer look at older, long-term loans. In addition, taking out a cheap installment loan is also worthwhile for those who use their overdraft facility often or continuously. After all, the interest terms on the overdraft facility are very expensive, so that rescheduling through a cheap loan is (almost) always financially worthwhile.
It is advisable to compare the terms of credit professionally and comprehensively. With the free comparison calculator from Good Finance, you can find a new loan with top interest rates in just 3 steps:
It's easy to find your new loan on Good Finance
Indication of the desired loan amount, the term and the purpose
Select a suitable offer
Take out a loan
How does a loan repayment work?
If a loan repayment is to go smoothly, it is very important to clarify the further steps early with the bank giving the new loan. As soon as the bank is informed. The following steps must then be taken until the loan is repaid:
Step 1: Check the terms of your "old" loan
First check your "old", still existing credit contract and answer the following questions:
What loan terms have been agreed? (Monthly rate, term, interest)
Will a prepayment penalty be due to the bank for early loan repayment?
What is your remaining debt and the transfer fee for your loan?
What are your current monthly installments?
How long is the remaining term of your loan?
Step 2: carry out a Good Finance credit comparison
Before you cancel and repay your old loan, make a loan comparison and find out which bank gives you the best and cheapest loan for your situation. At Good Finance it works very simply:
Specify the loan amount, term and purpose. Then you provide some information about your income and after a few clicks you can choose from tailored loan offers.
Step 3: Loosen the old loan
After you have decided on a loan offer, all you have to do is send some documents to the bank and authenticate yourself by post or video identification.
Now there is nothing standing in the way of the loan repayment. You can now cancel the old, expensive loan and replace it with your new loan with a one-time payment.