The loan is granted on the basis of loan agreements, in which conditions such as the loan amount, the term and the contractual partners are specified. The level of interest, which is based on the current market level when the loan agreement is concluded, also needs to be regulated.
In fact, the interest rate level of banks is subject to annual fluctuations, which can have a positive or negative effect on the amount of the loan taken out over the term of the loan. It is therefore all the more important that the borrowers regularly inform themselves about the current interest rate level and reschedule the installment loan if this should be necessary.
Debting the installment loan: important criteria
The advantage of a normal installment loan is that, unlike a special-purpose loan, it does not have any special agreements, such as agreeing a purpose, and is therefore well suited for debt rescheduling. However, the borrower should avoid hasty decisions and compare the terms of the supposedly cheaper loans in detail. This is the only way to ensure that the consumer can reschedule the installment loan and thus actually achieve financial savings.
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The prepayment penalty
In this context, prepayment penalty plays an important role. Some credit institutions require such compensation in the event of early termination of the loan agreement. The prepayment penalty therefore reduces the savings based on the lower interest rates of the new loan. The amount of the prepayment penalty for the installment loan rescheduling was regulated by the legislature. It is one percent of the remaining debt due if the remaining term is more than 12 months.
If the term is less than 12 months, the permissible percentage is 0.5%. As not all banks charge a prepayment penalty if borrowers reschedule their installment loan, the applicant should inform themselves in advance about the procedure of their future contract partner.
Borrower’s duty to provide information
If the borrower has opted for a cheaper loan, it is appropriate that he informs his previous lender about the rescheduling in the course of the termination. The credit institution can then react accordingly and, if necessary, forward a report to the Credit bureau credit reporting agency. No further entry will then be added to the borrower’s Credit bureau account, since the new loan was taken out as part of the rescheduling of an installment loan and thus serves to settle the old loan debt.