Massive inflation burdens millions of citizens. Many borrowers can use a savings opportunity to relieve their budget: By rescheduling to a cheaper loan, a typical borrower can reduce their installment payments by up to 109 euros – per month.
However, this amount of the rate reduction only occurs if the borrower extends the term of the new contract at the same time.
On the other hand, those who leave the remaining term unchanged reduce their monthly expenses by only nine euros due to the lower interest rates. That’s not a large amount, but: over the full repayment period of five years, the total savings add up to 546 euros. This is shown by calculations by the comparison portal Verivox.
The average remaining debt of consumers who reschedule debt via the Verivox portal is around 21,000 euros. On average, there are still five years left until the old loans are fully repaid. At the time of the debt restructuring, these have been running for around two years on average.
According to Bundesbank statistics, about two years ago, banks charged an average of 5.74 percent nationwide for an installment loan. This is cheaper with a rescheduling loan With the financial platform, borrowers currently only have to pay an average of 4.75 percent interest. By rescheduling an amount of 21,000 euros on these more favorable terms, consumers can save a total of 546 euros in interest with the same remaining term.
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Because the savings are spread over the entire repayment period of five years, the monthly rate in this sample calculation is only reduced by nine euros. In order to relieve their monthly household budget even more, consumers can take out their debt restructuring loan with a longer term – this lowers the monthly rate. Anyone who allows two years more time to repay the loan reduces their monthly rate by 109 euros compared to the original loan.
Although such a step extends the duration of the repayment, it can noticeably relieve a strained monthly budget.
However, a longer repayment period has one disadvantage: the more time consumers allow for loan repayments, the longer they also have to pay interest. This drives up the overall costs. Despite the lower interest rate, consumers would pay a total of 520 euros more to repay the new seven-year loan than for the old loan with a shorter remaining term. Therefore, only those borrowers who have problems with the current level of repayment rates should extend the term.
Verivox advises borrowers to also consider the possibility of special repayments. This allows a loan to be repaid more quickly, which in turn leads to lower interest rates.
Tip: So that there are no additional costs for such special repayments, those interested in credit should pay attention to flexible repayment options when looking for a suitable rescheduling loan. According to Verivox, this is what numerous banks offer.
In its model calculation, Verivox does not take into account any compensation for the early repayment of real estate loans. Whether a so-called prepayment penalty is due in individual cases depends on the specific loan agreement. Unless otherwise agreed there, the old bank can demand compensation for the lost interest income – but no more than one percent of the outstanding balance. Due to the lower interest rate, the debt restructuring would still be worthwhile in this case: With a debt restructuring loan with the same term, the total costs would still be 311 euros lower than with the old loan.
About the calculation method
The following parameters of a typical debt restructuring were assumed for the model calculation:
