Information on early repayment of loans, including tips on how the repayment of the loan works better, advice on Intrasavings loans and prepayment penalties. Since the bank loses interest income through early repayment, it is often entitled to a compensation payment - the so-called prepayment penalty. For early repayment, a fee will be charged. Do you have a loan and want to replace it before the actual due date? Even if the bank demands compensation, the early repayment of the debt may pay off.
Early repayment of loans: Early repayment compensation calculator determines the expenses
If you want to redeem your loan early, you must pay the house bank compensation with the early repayment, so that it no longer calculates with the secured income from the fixed interest rate. In the event of early repayment, the house bank must "reinvest" the paid capital - either into new loans or through the acquisition of fixed income securities such as government bonds or mortgage bonds.
The fact that in such situations the calculation of the early repayment requires an arithmetic competence is due to the fact that a number of influencing factors can considerably change the fee level. Here, the difference between the fixed interest rate of the terminated loan agreement and the current market interest rate, which the principal bank receives for investments with comparable fixed interest rates, is of major importance. The more cuts the banks have to make in reinvestment, the greater the deposit fee.
The repayment amount also affects the expenses if a borrower wants to repay the credit volume prematurely: the larger the current repayment, the lower the settlement. Borrowers can use the early repayment calculator to at least roughly calculate what expenses they will incur if they want to prepay their loan early. The prepayment penalty can hardly be calculated as a flat rate on USD and cents, as the values may ultimately vary slightly due to daily fluctuations in interest rates on the capital market and internal bank constellations.
If further internal bank information such as the margin refund, the risk savings or the administrative costs are available, these can be specified optionally.
Removes loans prematurely
Loan repayment refers to the principal termination option of an existing loan in its current form. When repaying a loan, this is not always a change of bank. The new loan volume can also be concluded with the previous house bank. The repayment of the loan will be made in these cases by reallocation of the existing loan to a new one under different conditions.
With regard to the contractual agreement on the duration of the existing loan and the loan to be repaid, it must be examined in particular whether and under what conditions an early withdrawal from the contract is possible at all. This raises the question of what consequences borrowers will face in the event of early loan repayment. Against this background, the following main reasons for the early repayment of a loan are crucial.
On the one hand, it is conceivable that an early repayment of the loan is possible due to an unforeseeable improvement in the financial position of the borrower at the time the loan is taken out. By restoring the borrower's discretion, the borrower will usually endeavor to pay off as quickly as possible any loan debt that may have been binding on him for many years. Thus, it is easily possible that the interest rates contractually agreed when taking out a loan are now decoupled from the general market trend.
Especially in times of low interest rates, a fixed rate loan can lead to additional financial burdens under such conditions. Even in this situation, the borrower will be interested in getting rid of unfavorable interest rates and, first of all, concluding a new loan with his principal bank at better market conditions. If the house bank refuses to reschedule the old loan, the borrower still has the option to fully withdraw from the loan contract.
The borrower is in these cases interested in a favorable interest clause in the loan agreement. The legislator is therefore required by law to notify the borrower at least three months before the end of the fixed interest period whether he is prepared for a new fixed-interest agreement ((!) 1 p. 1 p. 1 BGB). If the lender declares this intention, he must specify the interest conditions under which the successor offer is to be made (§ 492a para. 1 sentence 2 BGB).
The statutory provision ensures that the borrower's information obligation ensures that it is clear whether the principal bank is interested in continuing the previous interest agreement. This gives him time to assess the potential change in credit terms and their effects. Similar is the situation for the debtor, who wants to free himself from his variable interest rate and, instead, wants to enter into a more favorable fixed interest rate agreement.
In particular, in times of high interest rates, interest rate increases are immediately passed on to the borrowers if they have concluded their contracts at a variable interest rate. The interest rate is linked to the current market development and interest rate development according to the usual banking credit conditions, so that these borrowers are regularly influenced by corresponding interest rate adjustments. Also in these cases, the borrowers can improve at first due to a rescheduling with their house bank.
If the house bank refuses this measure, a definitive repayment of the loan must be considered. 2. Loan repayment is also an advantage for borrowers who need to look after several loan agreements at the same time. This gives them the opportunity to combine all current loans in connection with the restructuring into a loan. In addition to more effective debt management and greater openness, it is often possible to save in the long run, as merging into a loan allows significant interest savings if a moderate agreement is reached.
In the lending business such a rescheduling is usually possible without much additional effort. The borrower concludes a new loan transaction with an institution in which all existing loans are to be integrated. At the same time, the Company may be instructed to repay existing loan liabilities to third-party banks. The resulting repayment cost (payment of all loan liabilities by the withdrawing bank) is then added to the new one.
There are basically different exit options.
Decisive for the selection of funds is always the economic project pursued by the borrower. If he immediately remembers the conclusion of a credit agreement of another, he may withdraw his declaration of intent within a certain period of time, with the consequence that the contract is not concluded.
If, on the other hand, the loan agreement is legally effective, it can be terminated early with certain statutory notice periods, which ultimately leaves the borrower without the loan agreement. If he does not want this, because he has agreed with his house bank, a redistribution of debts, usually no formal dissolution of the previous loan agreement is required.
The existing loan (old loan) will then be converted into a new loan without notice under the debt rescheduling agreement. In addition to resignation or termination, borrowers have the option of repaying an existing loan by agreeing a rescheduling with their principal bank. Depending on the particular house bank, it may be necessary not to cancel the existing loan.
Instead, the old loan will be continued on a new basis, so that instead of a contract resolution, a friendly change in the contract takes place. The rescheduling may include the determination of a more favorable interest rate for the borrower or the merger of multiple loan liabilities into a loan. Unlike the termination of mortgage loans, the law does not require financial compensation in the form of early repayment for the termination of standard installment loans.
This results from the omission of a provision for the termination of loans secured by mortgages (conclusion from § 490 para. 2 p. 3 BGB). Nevertheless, the credit conditions of institutions include, in part, provisions requiring the payment of an early repayment even in the event of a premature termination of a consumer credit agreement. Therefore, by virtue of the principle of contractual freedom, an institution is not prevented from applying such an agreement to its credit agreements.
Thus, the maturity issue in case of early loan repayment is resolved differently from house to house. The validity of the legislation, however, is also tied to the institutions which are burdening it. Therefore, no early repayment can be required if the borrower exercises his statutory right of withdrawal.
Therefore, it can only be taken into account if the borrower liquidates the loan without observing the statutory notice period of three months. The credit institution may in such cases calculate a compensation payment, which usually results from the loss of the interest income that the lender earned until the first ordinary call option. In the case of other banks, an early termination is usually waived on early repayment, even if the deadline is not met.
But even in these cases, the borrower has to expect that the financial contract will incur additional financial losses, which would be charged to him. Credit institutions that have waived compensation usually charge the borrower a reasonable processing fee. An accurate cost calculation is always recommended before the borrower performs a loan repayment.
On the basis of an individual assessment of the economic situation, the respective offers of the market can be checked. In the case of a lucrative loan offer, the borrower should first enforce the more favorable conditions under the contractual relationship before he prematurely terminates the loan. As competition and migration pressures increase, banks are often able to make appropriate concessions, and clients should always use that room for maneuver.
If the lender is unwilling to reach an agreement at the end, the contract should not be terminated until it is clear that this process will pay off. For this purpose, the borrower must make a detailed reconciliation, which compares the financial burden of paying a prepayment or handling fee with the interest saved by taking out a new loan.
Only when this bill has led to a positive balance, the repayment of the existing loan makes economic sense. Special repayment instead of loan repayment? In addition, institutions will offer borrowers the opportunity to repay their existing loan liabilities unscheduled. Unscheduled repayments are special payments on the loan debt that are not included in the contract or are compatible, but are nevertheless accepted by the credit institutions.
This is by no means a matter of course, as the unscheduled repayment reduces the interest margin of the bank. Nevertheless, it has established itself in lending practice and is now tolerated by almost all banks. However, most credit conditions of the institutions provide that they are permitted for the first time after the end of the first half of the year (notice period).
In addition, it is explicitly stated in the loan terms that the unscheduled repayment does not lead to a reduction in the monthly installment, but only to a reduction in the remaining term of the loan.