What is a credit release?

 

Things to consider after credit release

Things to consider after credit release

With a loan repayment, you pay back the outstanding balance of an existing loan completely. The credit agreement is dissolved thereafter. A loan transfer makes sense in many cases. The most common reason for a premature release of a loan is a debt restructuring on another loan.

If you have various loan agreements with different contract periods and monthly contributions, switching to a single loan agreement that replaces all other existing loans is often recommended. In many cases you can even benefit from a lower interest rate.

Fees for a loan repayment

Fees for a loan repayment

Banks and credit institutions generally require fees for the early redemption of a loan agreement. In addition to the fixed fees, many providers additionally charge a prepayment penalty. However, in order to calculate compensation, banks must take into account any special repayment possibilities granted to the client. As a result, the prepayment penalty for consumer loans is generally quite small, as the contracts usually provide for extensive special repayment possibilities of up to 50% of the original loan amount per year.

With real estate financing it looks different. Here, the prepayment penalty can quickly be in the five-digit range, if the contract comes from a time with higher interest rates. However, real estate financing may be terminated every ten years without a prepayment penalty being incurred. Within ten years, however, the banks may demand prepayment penalties. Especially with mortgages worth a comparison of the individual financing options. Sometimes it even makes sense to accept the prepayment penalty and switch to a cheaper provider, as the savings over the term is higher than the compensation payable.

Reasons for early loan repayment

Reasons for early loan repayment

In the event of early redemption, you will in any case save the interest that would have become due over the remainder of the term. With several years of residual maturity, four-digit sums quickly come together even for consumer loans, which you then do not have to repay in addition. In addition, any consumer loan fees are manageable in most cases.

For real estate financing, you should exactly calculate whether a premature transfer makes sense or you prefer to wait until the expiration of the ten-year notice period to place the loan with another provider. If your contract expires in three or fewer years, a forward loan may also be advisable. You will then conclude a loan agreement today, but this will only be paid out at the end of the old loan. In future, the now agreed interest rate will apply. The granting of a forward loan, however, banks can pay with an interest premium.