Payday Loan Consolidation: To repost credit during the term
Whether customers can repay a loan during their term depends on the type of loan. For consumer loans, early termination is possible in principle. However, the credit institution may charge prepayment interest, unless the credit agreement expressly provides for the right to a premature early repayment of the loan. For real estate loans, however, the exclusion of early repayment is possible and widespread. In this case, the bank must agree to an early repayment only if its client wants to sell the financed property. Of course, real estate financing also has the option of including in the loan agreement the right to full or partial early loan repayment.
When is a rescheduling useful?
According to the advertising of some financial institutions, borrowers should already repost a loan during their term if they have several loans to service at the same time. However, as almost all lenders charge the due installments, several loans to be repaid on their own do not entail any time or organizational burden for the consumer. For that reason, the merger of various loan agreements without further advantages alone is not a sufficient reason for rescheduling. Instead, customers pay off their debt through a rescheduling when the new loan is associated with interest savings. In addition, consumers may repay a loan during their term if they rely on lower monthly installments and the current lender does not agree to an extension of the term.
Before consumers repay an existing loan during the term, they calculate their savings. They take into account not only future interest rates, but also the prepayment penalties they may have to pay for the loans to be repaid. In addition to the effective annual interest, debtors also pay attention to the further terms of a loan agreement. Agreements on a partially flexible repayment, such as the right to an occasional installment suspension and the possibility of free special repayments, justify a small premium compared to the more favorable but rigid offer alone. Furthermore, the credit offers for rescheduling differ by
It is advantageous for the borrower if he does not have to incorporate reduced-rate special loans such as car loans or interest-free purchase financing into the debt restructuring. The installment agreement of a credit card account and the discretionary credit, on the other hand, should include all bank customers who repost a loan during the term in the new loan, as the interest rates for these flexible loan options are higher than average. Several banks calculate lending rates based on the credit rating of the lender. If these have improved since the first borrowing, credit customers sometimes save a lot of money if they repay their expensive loan during the term and opt for a cheaper offer.
The peculiarities of a debt restructuring
The processing of the loan differs from a normal consumer loan if a customer wants to repay the existing loan during the term. In the case of loan debt restructuring, the lender needs the assurance that the applicant is actually using the new loan to offset existing liabilities. The result of the revenue and expenditure account would be inappropriate for the use of the debt rescheduling loan as additional credit. The notification of the new lending to the private credit is connected with the information about the replacement of the existing liabilities. It is therefore customary in a rescheduling not to transfer the loan amount to the account of the borrower. Instead, the new lender directly adjusts the previous credit accounts,
In some cases, the usual procedure for paying out a loan is not possible, as some credit card issuers generally reject transfers by third parties. Of course, the debtor receives the affected partial amounts through his account. This also applies to the settlement of the disposition credit and to a possible increase in the total loan amount. It is common for borrowers to combine a debt rescheduling with an increase in the loan amount. Since most banks lend only loans to smooth amounts, at least rounding up is required. However, many customers also take on additional loans for additional purchases once they repay a standing loan during their term.
Several banks offer preferential terms to unrestricted loans when their clients repay an existing loan during their term. These special conditions are advantageous for the borrower. However, it is advisable to consider both special debt rescheduling and traditional consumer credit when making a credit comparison. Possibly, a bank offers a loan without earmarking on more favorable terms than a competitor, the special rescheduling loan.