A loan is traditionally accepted when a major purchase, such as buying a car or building a house, is pending. The time for such a purchase is influenced by many factors – cheap new car offers, offspring is pending. It is not always possible to conclude a loan on favorable terms.
Installment loans now replace easier
If an unexpected windfall comes into the house, it makes sense to replace such a loan completely or at least partially. A return on principal received is likely to be lower than the loan interest you pay to the bank.
But because the banks did not want to do without this business with lucrative installment loans, a replacement was bound by months of deadlines. Often a transfer without a separate agreement was not possible. For this purpose, the banks were well-paid for such a procedure: Often the entire interest, which would have become due in a installment payment, was charged in the replacement of a installment loan.
A new EU directive has been strengthening consumer rights since the middle of last year. This is not only regulated by law that a borrower can replace his loan in whole or in part in each case. Also, the resulting fees were limited: The banks may demand a lump sum of at most 1% of the repayment amount, the remaining term is less than a year, this share even drops to half a percent. Thus, you can already replace a installment loan today, where it would have been uneconomical so far.
Rescheduling saves money
But not only in case of unexpected windfall you should replace your installment loan. So it can make sense, if the conditions for a new loan are favorable. With this type of rescheduling, you raise a new loan equal to the remaining balance of the old loan. Lower interest rates then allow for lower monthly installments or a higher rate of erosion at constant rates. A third option would be to borrow more while repaying at the same rate, and to raise fresh capital. Whatever your decision, if you want to repay an installment loan: Inform yourself as quickly as possible so as not to give away any money.