If something is to be acquired that does not have sufficient financial resources or is perhaps available in the required amount, the answer is usually as follows: A loan is needed! So you start looking for the cheapest possible loan offer, whereby the effective interest rate often has to serve as the main criterion for a decision pro or contra. In most cases, credit decisions for most people are something like this. Basically there is nothing wrong with that.
Except for one point, because a loan that was considered cheap a few years ago and is still being paid off today can be quite expensive under today’s market conditions. The reason is that market conditions for all kinds of loans have changed significantly in recent years. In a direction that has improved significantly for borrowers with an existing repayment obligation. To put it plainly: Most of the loans still in place today would be significantly cheaper if the debt was rescheduled .
Significant interest savings through loan debt restructuring
It is now no longer a secret that, due to the low interest rate policy of the European Central Bank, the interest rate level on loans has decreased continuously in recent years. That means that loans became cheaper and cheaper. The result of this is that loans that were closed a few years ago and are still open today are significantly cheaper.
Viewed by today’s standards, you simply pay too much for old loans. So what could be more obvious to adapt these old and expensive loan liabilities to the current state of the credit market through debt restructuring? To be able to give an honest answer to this, you don’t have to be a financial expert or anything else, because it simply has to mean: nothing! This statement can be explained on the basis of three simple, understandable reasons.
Useful summary of several, expensive loans
In particular, in a situation in which several loans with different terms have to be repaid, rescheduling should be considered. On the one hand, the debt burden becomes much clearer by summarizing all loan liabilities in just one installment. On the other hand, debt rescheduling on a cheaper overall loan can generally save a lot of money through lower interest rates. Especially if the old loans were taken out in a high-interest phase.
Reduction of monthly loan installments
In principle, rescheduling also makes sense if reducing the monthly loan rate is (or must be) the primary goal. The credit rate is reduced by rescheduling the remaining debt of the current loan to a loan with lower interest rates and a longer term. A longer term reduces the interest savings, but the monthly rate becomes smaller. The positive effect of this measure is that more money is left over for everyday life.
Faster debt-free due to reduced maturity
The rescheduling of a loan while maintaining the previous installment can also be recommended. In such a case, the repayment of the loan and the resulting freedom from debt can be achieved much more quickly. The currently low interest rates make it possible to repay the remaining debt more quickly at the same rate. As a result, the total term of the loan is significantly reduced.