Loan a loan: how it works

When can the loan be redeemed early?

Contracts for loans, like all other contracts, also have periods of notice, which must be observed in the event of early redemption. Installment loans can usually be terminated six months after payment with three months’ notice if they are signed before June 2010. Under EU law, younger installment loans can be terminated at any time without notice. Check your loan contract.

Real estate financing, on the other hand, is more difficult to cancel because such contracts run at least until the interest rate is fixed. That means at least over the period in which the interest rate to be paid is contractually fixed.

Redeem overdrafts

The easiest way to get a loan is with overdraft facility, which you use with your checking account whenever you “overdraw” it, so to speak. To pay off a overdraft facility, all you have to do is clear the current account. If you often exhaust your bank’s overdraft facility and find it difficult to make up for it in a timely manner, an installment loan as a debt rescheduling is a cheap alternative. If you are in the red for a longer period of time, you pay high interest costs on your overdraft facility – often over 10 percent. With an average of 4 to 5 percent a year, an installment loan is considerably cheaper. With the money made available from the installment loan, you can conveniently redeem your overdraft facility by simply transferring the money to your account and ultimately paying less interest.

Repay installment loans

Repay installment loans

The repayment of the installment loan, which was taken out, for example, for car financing, is also easily possible by rescheduling to a cheaper loan. Several current loans can also be replaced by a larger and cheaper installment loan. It is important that you always have savings in the end. Inquire with your bank about the amount of the remaining amount so that you can easily repay it with a better prepared loan by rescheduling. The same conditions apply to the credit line, which is usually cheaper than a credit line, but more expensive than an installment loan.

Loan building loan

Loan building loan

The loan repayment of a mortgage loan is heavily dependent on the terms of the loan. Is it a building loan or a building loan with or without fixed interest rates? It is usually not a problem to replace so-called variable loans. There, the interest is not fixed for a certain period of time.

However, if a loan has a fixed interest rate, you have to rely on the lender agreeing to prematurely repay the loan. In most cases, this option comes with paying a prepayment penalty. You must take these costs into account if you want to redeem the loan early. The same applies to debt restructuring if you want to replace the old loan with a new one. Always include the prepayment penalty and check whether the early redemption is really worthwhile.

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