Why a credit change can also make sense
Every year towards the end of the year, thousands of car owners change their car insurance because other providers are cheaper. But few borrowers change their loan provider during the loan period. Read the following article to find out why a loan switch can also make sense.
Who can change their credit provider?
In principle, every borrower can change providers during the term of a loan. For this purpose, a new loan is taken out with another credit provider, with which the existing loan with the old credit provider is redeemed. This procedure is called debt restructuring. When this is worthwhile and what you should consider, we clarify in the following sections.
When can a credit change be useful?
To consider a credit change can have several reasons. This includes in particular the following situations:
- Replacing an expensive loan
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The advantages of switching loans
Switching loan providers can not only make sense, it also brings some advantages:
- The overview of one's own financial situation is improved
The change of a credit can bring thus some advantages with itself. To take advantage of this, you can easily find a suitable new loan with us and apply directly online.
What should be considered when changing credit
Since 11.06.According to an EU directive, credit agreements concluded in 2010 can be terminated without a notice period in order to switch credit providers. A notice period of three months applies to contracts concluded before this date. However, you should read your loan agreement carefully when considering a loan change. Banks have the right to charge an early repayment penalty if the loan is terminated before the actual end of the loan period. This is to compensate the lost interest income for the bank. Here applies:
- If the remaining term of the loan is longer than 12 months, the early repayment penalty may be a maximum of 1.0 percent.
- For residual terms of less than 12 months, a maximum early repayment penalty of 0.5% may be charged by the bank.
However, it can be difficult to find a new credit provider for less than twelve months, as the remaining debt in most cases is correspondingly low. Many banks require a minimum loan amount or even a minimum term.
This is how you proceed for a credit change
In any case, you should carry out a credit comparison in advance of the loan change and compare the conditions of the old loan with those of the new one. To do this, take the remaining term, the remaining debt, the estimated interest and the monthly installment together and calculate the total cost of the two loans:
|Old credit||new credit|
|48 months remaining term||48 months term|
|10.000 € remaining debt||10.000 € borrowed|
|6.00 % annual percentage rate of charge||3.50 % effective annual interest rate|
|234,12 € monthly installment||223,32 € monthly installment|
|11.237,76 € total repayment||10.719.36 € total repayment|
|1.237,87 € total interest payments||719.16 € total interest payments|
Savings through credit change:
1.237,87 € – 719,16 € = 518,71 €
Less 1% early repayment penalty: €418.71
In this example, you can save a total of 418.71 € by changing your loan.
Conclusion to the credit change
Especially in the current low-interest phase, a change of credit can be quite useful to be able to save a few hundred euros. If the interest rates on the market should rise again, this could already look different again. A change of credit is particularly worthwhile if the current credit provider allows a free total repayment, so you do not have to pay an additional early repayment penalty. If this is agreed in the old credit contract, it must be absolutely included in the consideration of the credit change.