Cheap debt restructuring – what are the costs?
If you have trouble making ends meet, if your stack of monthly bills is covering every inch of the kitchen table, if the money coming in doesn’t come close to the money going out, it would seem like you’ve officially reached the end of your financial rope.
Now some good news: You really haven’t. There’s hope. Your solution could be a debt consolidation loan.
For convenience, many borrowers refrain from arranging follow-up financing for their building loan or real estate financing – and in the end they pay significantly more than when changing banks. The bank with which the first loan was taken out has no particular reason to offer follow-up financing at a very favorable price.
The interest rate fixing period negotiated with the bank is decisive for the time of follow-up financing, but borrowers generally have the right to terminate the loan with a six-month period of notice after 10 years of interest fixing, without having to pay the bank any prepayment penalty.
Debt restructuring costs
Many borrowers who should actually take care of debt restructuring are deterred by the costs of switching financing: the costs are primarily associated with the transfer of the mortgage to the new lending bank. However, these costs are reasonable and are sometimes even borne by the bank itself. If the debt is rescheduled, the borrower does not have to re-estimate costs.
Debt a loan cheaply – of course, the first thing to watch out for is the interest rate. If you want to cancel the old loan before the fixed interest period has expired, you should check whether it is worth paying the prepayment penalty, because it can sometimes be cheaper to wait for the fixed interest period.
Favorable interest through forward loans
Those who still have around two or three years to go before the fixed interest period expires can, provided the current interest rates are attractive, secure this interest for a later loan, using a so-called forward loan. Such a loan naturally only guarantees a favorable debt rescheduling if the interest rates are likely to rise again and not decrease, and the borrower must also factor in the commitment interest for the forward loan.
It is always worth looking for cheap debt restructuring! For convenience, staying with the same bank is simply thoughtless: a comparison of interest rates is quick and the change itself uncomplicated, since the banks do most of the work for the borrower.