- Consolidation of existing loans in one rescheduling loan
- Clarity of liabilities
- Financial relief
- Guaranteed without upfront costs
Note the prepayment penalty for the rescheduling loan
If you terminate your loan early and want to repay it, your bank is often entitled to a so-called prepayment penalty.
The early redemption of a loan is normally possible without the consent of the bank. Nevertheless, the lender may charge the customer for his lost profit from interest income in the form of the so-called prepayment penalty. How high this compensation is depends in particular on the current interest rate and the remaining term. With the consumer credit guideline of June 11, 2010, the legislator set limit values which must not be exceeded when calculating the early repayment penalty. For example, the prepayment penalty for loans taken out on or after June 11, 2010 may amount to a maximum of one percent of the remaining loan amount .
For loan agreements with a short term of less than a year, this maximum amount is 0.5%. In any case, the amount must not exceed the value of the lost interest. In some special cases, you as a borrower also have the option of canceling the loan without incurring an early repayment penalty. This is the case for loans with an agreed fixed interest rate of over ten years. These loans can be terminated after the end of the tenth year with a notice period of 6 months without incurring a prepayment penalty. Another way of avoiding the early repayment penalty is the redemption clause. Under certain conditions, this can be agreed in advance with the bank and included in the loan agreement.
Why do banks even charge early repayment penalties?
When the bank grants a loan, an interest rate is defined in the loan agreement, which is usually fixed for the entire term. Ie the bank receives monthly interest income from the borrower in return for the borrowed money. With this fixed income, the bank can calculate firmly for the duration of the loan - provided the borrower does not terminate the contract prematurely. At the same time, the bank must refinance itself in the amount of the loan amount. It does this, for example, through savings deposits from private investors. The bank in turn has to pay savings interest to them. If a loan is terminated prematurely, the bank will lose interest income that it had firmly expected. The bank therefore demands compensation from the borrower for the lost interest income. The calculation of the early repayment penalty for prematurely terminated consumer loans was relatively complicated until the Consumer Credit Directive came into force. The fact that banks even overcharged was not an isolated case.
There are separate rules in the area of mortgage lending and real estate loans. In the case of financing with a fixed interest rate of more than 10 years, the borrower may terminate the contract after 10 years with a 6-month notice period according to the special right of termination in accordance with § 489 BGB without incurring a prepayment penalty. The bank can agree to termination within the fixed interest period, but does not have to. Therefore - apart from a few exceptions - rescheduling a mortgage loan is only possible and useful after the fixed interest rate has expired. If the bank accepts your early termination within the fixed interest period on goodwill, it may demand a prepayment penalty for the lost interest income.