Sometimes it happens that people take out a loan that they are not so happy with afterwards, in which case a loan refinancing can offer a solution. The loan turns out to be more expensive than you initially expected. The total amount of repayment and interest on your existing loan is higher than you would borrow the same amount again today. In that case, a loan transfer can save you a lot of money.
What does a loan mean?
In short, refinancing a loan boils down to the following. You take out a new loan with which you pay off your old loan in one go. For example, it may be that the loan interest has fallen enormously in the meantime, which makes it interesting to refinance your old loan. The new loan has a lower interest rate and therefore lower costs.
Transferring a loan pays off
There are many different loans available and you can go to many lenders to take out a loan. This makes the entire process of borrowing money unclear if you are looking for the most suitable loan. It is therefore not surprising that someone takes out a loan that he is not so happy with later.
After taking out, you discover that there is a cheaper loan with a lower interest rate and better conditions at another bank. In that case, transferring your old loan is the best option.
But can you just transfer your old loan?
Many families have taken out a loan that they cannot get rid of for the time being. The television program Radar recently paid attention to this. Since the loan was taken out, the interest has fallen enormously, which makes it interesting to refinance a loan. However, the conditions of the loan state that a huge penalty interest is owed in the event of interim repayment, which makes early repayment not interesting.
Of course, this is not proper from the bank where these people took out the loan, but the bank is entitled to adhere to the conditions.
Therefore, do not only look at the interest when you take out a loan, but also at the conditions so that you can make interim repayments without penalty. Read our article “ compare loans ”.
How does it work?
If you decide to transfer your loan, you take out a new loan with another or the same bank. Even if you still have to pay penalty interest, a transfer can be interesting. You use the money from the new loan to repay your old loan. Because the new loan has a lower cost, you could borrow even more money while the monthly costs remain the same. However, a bank will never provide you with too much money. Maximum borrowing is not always sensible. The bank looks at your income and monthly costs for the new loan amount.
The fine print of the loan
When taking out a loan, always look carefully at the conditions and agreements of the loan. In addition, be sensible and determine for yourself what you want to pay in maximum monthly payments. Borrowing money costs money and it is a given that people do not always realize how much they can afford to lose each month.
To avoid getting yourself deep into debt, you can get information from the bank or lender. This way you can take out the most suitable loan. Whether you want to borrow a small amount or a large amount, avoid paying too much for your money loan.
The terms of the loan therefore state whether you may repay the loan early without paying penalty interest. This means you can always refinance the loan and you have lower monthly payments.