It is not uncommon for an old loan to be replaced by a new loan. In this case it is called debt restructuring! If current interest rates are lower than the old ones, an installment loan can be worthwhile for retraining. The new loan can be taken out at a bank that is selected. This means that the borrower is not obliged to take out the new loan from the same bank where the old one was already taken out.
Advantages of an installment loan for debt restructuring
An installment loan for retraining has many advantages. The savings in interest are often enormous and should always be compared. The effective annual interest rate must be compared so that a debt restructuring is also worthwhile. At first glance, a loan seems cheaper, but the APR exposes costs that were not considered before. The larger the loan amount of the old loan and the longer the term, the more it is worthwhile to take out an installment loan for a debt rescheduling.
It is not uncommon for the term to be shortened and the monthly installments to be reduced. A loan can be canceled at any time if it is to be repaid. So the new loan can include the loan amount of the old loan and another amount can be added up if another purchase should be made. So two birds are killed with one stone. The expensive loan no longer has to be repaid and there is the possibility of further purchases.
What should be considered?
The processing fees that are refunded when the old loan is repaid are important. If the old loan was taken out without processing fees, then the borrower can count himself lucky. In addition, any premiums paid for residual debt insurance must also be taken into account. In the case of insurance, only the surrender value is reimbursed; the borrower does not receive any premiums. It would be best if an installment loan was taken out for a debt rescheduling that the old bank prints out an offer, in which all the figures are visible. Only then should the applicant opt for an installment loan for debt restructuring.