Are you looking for a loan refinancing because you expect your financial restart from it? Would you like to use the currently low interest rates to gain liquidity and to borrow?
Long-term debt relief and liquidity gain are not a contradiction in terms. Nevertheless, we advise you not to summarize old debts at any cost. A successful debt restructuring is always the result of good preparatory work and some courage to work on details.
Preparing credit refinancing properly saves hard cash
A successful debt restructuring opens the way to a financial restart. The loan refinancing allows you to benefit from repayments already made and to reorganize your finances. Instead of several small payment obligations, only the debt rescheduling loan would have to be serviced. The monthly payment is reduced due to the appropriate duration and the implementation of repayments already made.
The bottom line is that the rate for the debt rescheduling loan always puts less strain on the household budget than the sum of the individual payments. Nevertheless, it is not enough to simply ask for the transfer fees of the old loans and refinance the total debt. It is true that every loan can be repaid early. This has been true for consumer loans for years and now even for mortgage loans.
Nevertheless, all early borrowing costs are not automatically calculated in the case of early loan repayment. Contributions to the RSV (residual debt insurance), for example, were co-financed in the loan amount. However, the credit institution does not count back unused contributions for insurance protection. Unused contributions would not even count towards the new loan refinancing through credit increase.
What is worth rescheduling – what is not worth it?
Large amounts of credit often have to be financed based on personal creditworthiness. Credit-related interest offers offer the advantage of being able to borrow more money overall. However, if such a loan has already been paid off far, the originally agreed interest rates are no longer related to the actual credit default risk. If such loans are grouped together, tangible interest savings can almost always be assumed.
Unfortunately, many those willing to reschedule the debt overlook the most important candidate for loan refinancing. They only look at their installment loans. The most expensive loan is the short-term credit over the overdraft facility and credit cards. These liabilities should therefore always be a top priority for debt restructuring. Instead of about 14.5 percent effective interest for overdrafts or credit cards, only about a third of the interest burden would have to be borne.
It is not worthwhile to reschedule a loan that has been secured with an RSV. In any case, the unused but already paid insurance coverage is lost. With average insurance contributions of around 10 percent of the original loan amount, this is an “expensive pleasure”. For example, if the transfer fee is 6,000 USD, the lost insurance portion corresponds to 600 USD. This sum cannot possibly be offset by potential interest savings.
Long term – gain liquidity
A frequent reason for the refinancing request for consumer loans is an excessive rate burden. In addition to the installment loan for the car, there is the loan for new furniture, for the TV set and partial payments to credit card companies. An old proverb says: “Many dogs are dead of the hare.” This sentence applies to too many payment obligations. If your finances are in disarray, the risk of overestimating yourself increases.
In total, the many small payment obligations become a burden. Many are far from the golden rule, at 10 percent of the net for installment payments, pensions, insurance, …. If the budget is too tight, sooner or later the overdraft gets out of hand. A loan refinancing can only solve the problem if high payments are not “nicely calculated” again.
Serious liquidity gains and the long-term avoidance of additional new borrowing are based on small installments that allow additional savings. Instead of repaying with maximum force, the rate is calculated so that about a third of the rate goes to a savings account. This money is reserved if the car has to be repaired or the heating bill tears a hole in the household budget.
Tip: save and pay off
Unused money can be used for additional repayment after one year. The savings portion enables the loan to be repaid faster if possible. At the same time, the savings book protects against new credit requirements because there is enough money on the side. This method brings debtors closer to the long-term goal of final debt relief than any sophisticated, high-rate financing model.
Credit problems for refinancing – offers of help
Borrowers who are already suffering from liquidity problems easily run into limits when refinancing their loans. Regular credit institutions deny access to the loan or request a guarantor who would be liable for the debt. In such a situation, it must be advised not to start debt restructuring without outside help. Errors in this precarious situation can jeopardize the success of the debt restructuring.
We recommend that you only accept offers of help from non-profit debt counseling centers. Experts work in the advice centers and demonstrate their knowledge every day. They provide neutral advice in favor of the person seeking advice, since their payment is decoupled from the result of the advice. Those seeking advice do not pay anything, the non-profit organization pays its employees without billing them.
Credit refinancing – provider recommendation
In the case of difficult refinancing, we recommend contacting reputable credit brokers. The credit brokerage portal Astro Finance has shown seriousness in independent studies, for example from DIW Berlin. Serious refinancing credit could come from Astro Finance, private donors and interested banks.
Astro Finance’s “best interest rate”, which often leads in credit comparisons, also proves that serious credit through intermediaries does not have to be expensive.