In particular, in the current low-interest-rate phase, there may be different reasons on the part of the borrower, which speak in favor of terminating an existing loan. This applies above all to consumer and consumer loans, but also in the case of mortgage loans, which have been concluded for example with a debit interest of more than 10 years, a loan termination can make a lot of sense. But what things must be considered by the borrower at termination? What should be done best and what are the pitfalls?
These aspects must be taken into account when canceling the loan
When it comes to the intended termination of an existing loan, it should of course be checked in the first step, whether the borrower is entitled at the current time, without any consequences, to the termination. Consumer loans or variable interest loans can usually be terminated at any time. Of course, it is important that the outstanding loan amount can be repaid in full on the agreed deadline. In the case of loans with a fixed interest rate commitment, for example a mortgage loan, the termination of the loan is much more difficult. Insofar as the borrower can not avail himself of the statutory right of termination, which exists after the lapse of at least ten years of debit interest, the bank normally demands the payment of a prepayment penalty.
In the case of termination against prepayment, it must be explicitly offset whether or not the loan termination pays off for the borrower. If credit termination and repayment of the outstanding loan amount have been successfully completed, it is of course important to ensure that any collateral that may be provided is released by the lender. In the case of a motor vehicle loan, this can be, for example, the vehicle registration document, which was deposited with the bank as collateral. In the field of mortgage lending, if the client so desires, ensure that the bank clears existing mortgages or land charges.
There should always be a conversation with the lending bank
If you want to tackle the termination of an existing loan, you should arrange a personal consultation with your bank for a variety of reasons. From the bank’s point of view, the personal conversation clearly belongs to the “good sound” and a fair customer behavior, after all, the bank wants to be informed as a business partner about the intention of its customer. For the customer, the personal conversation has the advantage that the bank, which loses by the loan termination finally scheduled interest income, the implementation of the loan termination understand and understand. Together we can work on an optimal and common approach, which leads to the fastest possible credit termination. Experience shows that it is often much easier for customers to play with “open cards”.
This can be especially important if the lender is the lead bank. After all, it can quickly happen that you as a customer get into an emergency situation in which you want support from the house bank (for example, short-term unemployment or a “phishing” incident in online banking). With a good relationship between borrower and lender, it may also be possible that the loan termination is handled with a certain amount of goodwill. In the event of the termination of a loan with debit interest, the bank could in this case waive part of the prepayment penalty.
Stumbling blocks in the loan termination
As part of the loan termination, it can also lead to certain problems and pitfalls. First of all, it is important that the borrower can already ensure at the time of termination that theoretically the open amount can be repaid immediately. In practice, borrowers have at least 14 days to repay the outstanding loan amount plus interest when terminating a loan. It would of course be fatal for the borrower, for example, if he terminates an open personal loan in the amount of 7,000.00 euros at his house bank, this is due the amount and the necessary capital for repayment is then not available. The termination of a loan agreement should therefore be well thought out and planned.
In the event of a rescheduling, for example due to a lower interest rate, the new loan agreement should already be in “dry sheets” at the time the loan is withdrawn. If an existing loan is canceled and repaid by accumulated credit, which is for example on a time deposit account, Bausparkonto or in a securities account, it must of course be ensured that the required balance is also available on the respective key date (under certain circumstances notice periods, etc. be taken into account).
Conclusion on the loan termination: In many cases, the termination of an existing loan, for example, due to a lower interest rate makes sense – but it always requires some planning. A consultation with the lending bank should always be conducted in order to seek a joint termination of the current credit agreement. In addition, of course, it must be ensured that the outstanding loan amount is also available for repayment at the end of the notice period – for example, by taking out a new loan (rescheduling) or using credit saved (debt reduction).