Redeem car loan – How it works?
Getting an expensive car loan saves costs because borrowers often pay high interest on old loans with long terms. These interest costs add up to impressive sums over the year, which can easily be saved by rescheduling at another bank.
Especially in times of low interest rates, the offers for cheap car and installment loans are particularly worthwhile for consumers. A car loan or installment loan from direct banks offers further savings potential, since online banks are waiting for customers with attractive terms.
Debt the car loan cheaply
If you want to reschedule an existing vehicle loan, you first have to find a suitable loan offer. On the one hand, you can take out a new, dedicated car loan on favorable terms, or you can opt for an installment loan for free use. Reducing the car loan with the car finance calculator is the easy way to quickly find suitable offers. If possible, you should select the “Debt” option in the loan calculator’s input mask so that you can see the relevant banks in the list, as debt restructuring at the bank must generally be possible.
Redeeming a car loan early with a loan from another bank only works if certain conditions can be met. This means that the bank that granted the old car loan also agrees to the debt restructuring or redemption. This is regulated in the contract. Anyone wishing to redeem existing vehicle financing early must expect the so-called early repayment penalty, which compensates the bank for the loss of interest lost. The contract documents show whether this compensation is due if you redeem the car loan earlier.
For loans that were taken out after June 10, 2010, the consumer credit guideline applies, which provides a right of termination for borrowers at any time. The prepayment penalty is limited to 1 percent of the transfer fee. If the remaining term is twelve months or less, the percentage is a maximum of 0.50.
Another point is the vehicle registration document, which the new bank can request as security for the car loan or installment loan. Numerous online and direct banks score here with their offers for car loans without a vehicle letter, which also give the borrower the freedom to sell the vehicle during the loan period. The down payment for a new car can be made by selling the old vehicle, but this requires the vehicle letter, which is still deposited with the old bank. Debting a vehicle is often the only way to get the letter.
If the vehicle financed by the loan loses its spirit or costly repairs no longer justify continued use, the purchase of a new vehicle is considered. However, the loan for the old vehicle is still running and financing is sometimes required for the new purchase. Repaying the old car loan through debt restructuring offers a real opportunity to implement these plans.
Refinance car loan
There are many different ways of car financing today: car loan, installment loan without purpose, zero percent financing at car banks, balloon financing or leasing. The possibilities always depend on your own requirements. Replacing the old car loan with a low-interest installment loan and flexible repayment options is a frequently chosen option.
With banks that do not use the vehicle letter when lending, the borrower can sell the vehicle at any time and sometimes opt for leasing or balloon financing if he is considering additional financing for a new car. However, two financings can only run in parallel if creditworthiness and income allow it. If the old vehicle is financed through a car bank, it may be possible, after consultation with the dealer, to convert the existing financing if, for example, a new car is to be purchased.
Repaying a car loan is always a question of costs and interest, and the repayment modalities are becoming more and more important, as old car financing is often very restrictive, for example in terms of installment breaks or early repayment without costs. With new loan offers, care should also be taken to determine whether the interest is dependent on the creditworthiness or whether it is granted independently of the creditworthiness. If you want to know whether and how much money you can save through a debt restructuring or redemption, you should use loan calculators and make car loan comparisons.
Would you like to redeem a car loan or prefer to keep it running?
Whether it makes sense to redeem a car loan or to reschedule it depends on the conditions and total costs of the existing financing. Currently, loans are cheaper than ever due to the low interest rate level, so savings are most likely to be achieved with a large number of existing loans. Numerous practical examples also show that it is worth repaying in most cases so that borrowers can finally get rid of higher debts, because high interest rates are tricky and are often accepted simply because rescheduling means effort. Compared to the big savings, this effort is definitely worth it.