Anyone who took out a car loan many years ago often paid far too high interest. Redeeming the loan can save a lot of money.
Watch out for the prepayment fee
If you want to redeem your car loan with another loan, you have to pay attention to the prepayment fee. This will be charged when the loan is paid off in full. Even if the new loan is taken out from the same bank, this fee is often charged. The bank is losing interest and is therefore charging a fee. The customer should have the bank calculate how much the payment would be if one loan is replaced with the other. The question often prompts the bank to offer the new loan on very favorable terms.
Otherwise she fears losing the customer. Some banks could also waive the fee if the new loan is taken out there.
Debt restructuring – right!
Debt restructuring is always an advantage when interest rates have dropped sharply. But if you want to replace a car loan with another loan, you shouldn’t forget some things. The new loan agreement should not be signed until the old bank has confirmed the redemption. If it was not possible to redeem the loan, there would be two loan installments.
Debt restructuring is only worthwhile if the total costs decrease. Interest plays a role in this. But if the credit rating is not the same after years, it can also lead to an expensive loan. If the car loan was taken out with a good credit rating, it does not mean that the credit rating has been reclassified after years.
A job change may have occurred. A non-binding offer should therefore be obtained. If the interest rate is now much higher due to poorly rated creditworthiness, no debt restructuring is worthwhile.
Compare first – then apply
Many banks make it easy for customers to have a car loan replaced with another loan. The new bank will contact the old bank and will take care of everything for the customer. Before it gets that far, however, you should first compare and then apply for the new loan. Credit institution where the car loan was taken out should be included in the comparison.
So a new offer can be found, which is really cheaper. A loan calculator from the Internet only requires the details of a debt rescheduling, the loan amount and the term. In this way, the customer can find out which providers actually grant a debt rescheduling loan. Loan seekers often find this information in the further product details.
Repay car loan with another loan – collateral
If the loan seeker wants to have a car loan replaced with another loan, collateral is not always necessary. The borrower must have a good income and a good credit bureau. In this case, loan collateral would not be required. It is different with people who have a low salary or a bad credit bureau.
Then the bank can certainly ask for a loan security. If the amount is not too high, a guarantee is often sufficient.
If the loan amount is well over 10,000 USD, life insurance or residual debt insurance should be considered. Securing a loan increases your credit opportunities. In addition, this also has a positive impact on interest rates and other conditions.