For various reasons, it may happen that another loan has to be taken. Here one can ask oneself whether the acceptance of a new loan or the increase of the existing credit makes more sense. Here, however, the lender has a say. In the end it only depends on who has the longer breath.
All facts about the guide “Credit increase or new” at a glance:
- The maximum amount of a loan is determined by the lender.
- The conditions must be compared within the credit institution and with the competition.
- When comparing the terms you can not limit yourself to interest rates only.
- In a bank conversation, better terms may be negotiated.
- The decision to increase or renew a loan does not depend solely on the borrower.
1. Determine the loan amount
Now it can happen with credit in progress that “you run out of money”. This can have various causes, but the best known is this topic when it comes to building a house. Both in the renovation of old houses, as well as the construction of new houses such problems are known. This may be due to a tight initial budget or you just have bad luck and everywhere unforeseen pits of money open up.
This is also one of the reasons why most lenders only lend real estate loans on presentation of an opinion. In the renovation or renovation of an old building, the need is not yet given, as usually there is at least a roof over the head. In a house construction, things look different again. If the project fails due to an insufficiently secured floor, construction can be stopped before the roof is erected.
Especially in the case of old building renovations also many borrowers only once to take up loans in the height, in which the grossest renovations are included. Further renovations can be made if there is enough money left or the loan is paid in half. The amount of the new loan to be made depends, among other things, on the project.
On the other hand, of course, the loan can not go beyond the maximum amount granted by the lender. If he believes that the desired amount exceeds the possibilities of the borrower, he can and must reject the loan application. Otherwise, he can not expect any case law in the very probable case of damage.
Thus, the amount of the loan amount can be considered as a compromise between what the borrower wants and what the lender grants. Of course, most borrowers are by themselves no loans inquiries in which they are not convinced themselves of the repayment ability. But many a borrower overestimates his ability to pay. In addition, employees tend to imagine salary increases that they have not yet promised or guaranteed.
Accordingly, the maximum amount of credit is limited to what the borrower is able to pay for the existing salary. This is then still dependent on the term. The longer the term is scheduled, the higher the loan amount can be invested.
2. Compare the conditions
The terms and conditions for loan offers change over time as, for example, the interest rates are adjusted to the current market trend. In times when interest rates are particularly low, there is a tendency for long-term loans with the longest possible fixed interest. If interest rates rise again, the loan terms offered are converted into the shortest possible fixed interest rate. Here, variable interest rates are given greater savings potential.
If one is now in the situation of needing more money, the question arises, whether it is more advantageous to increase the existing credit or to accept a new one. For this, the existing credit conditions must be compared with the current credit conditions. Here, however, caution is necessary, because the financial products can be coupled to others ! As a result, it does not seem clear at first glance which option has the advantage of increasing or reinvesting the loan.
If the existing loans are an all-round carefree package, you can make a more favorable position with the existing loan. In that case, it would make sense to top up if the lender allows it. Otherwise there is still the comparison with the competition to get out the most favorable conditions and submit to the previous lender.
A clear structuring can work wonders
When comparing the conditions, there can be all sorts of complications. Just comparing the interest rates falls short. Here it is advisable to make a tabular list of services and their costs. Although this process is very time-consuming, it can protect against surprises and save a lot of money. From a certain loan amount, a visit to the Consumer Center or an independent financial advisor is also worthwhile. Here is expected to cost at least 200 euros.
3. The conversation with the bank adviser
Balance the pros and cons
The conversation with bank consultants is suitable for both online and branch loans. Because even if the processing of the loan agreement without direct customer contact of equip, there is with every reputable online provider and customer service. They are happy to help and advise and to find a common solution. This happens at online providers mostly on the phone or by email. Timid borrowers will be accommodating this procedure.
The goal of the conversation should be to get better terms. In addition, there are also some organizational questions: is it possible to replenish? For loans concluded at lower interest rates than the current market rate of interest, it is unlikely that it will be in the interest of the lender to extend them on the same terms. A change here will certainly be accompanied by an adjustment to the current market interest rate. But who dares nothing who wins nothing.
On the other hand, one can also try to repatriate a credit agreement with high interest rates in order to take advantage of a current more advantageous financial market situation. On debt rescheduling or loan delisting, most credit providers are only partially conditional. In most cases, this is accompanied by a prepayment penalty. This may not exceed 1 percent of the remaining loan amount, but can still make all Vorteilhaftigkeitsrechnungen obsolete.
In bank talks the positions can be strengthened. Here is the opportunity to estimate how much room for maneuver exists and whether you as a customer ever gets a chance to act for his own benefit. Here you can negotiate better credit terms, which will be included later in the loan agreement.
4. Make the decision and implement it
In the end, a decision must be made. Considering all good advice, hints and objective consideration then the best situation for the borrower can be considered. No matter how the decision turns out, in any case, forms will need to be filled out.
Whether existing loans should be extended, new loan agreements concluded or existing loans should be terminated, it is advisable to have the documents read by a legal expert. Not that one digs a debt trap with a supposedly wise and carefully considered decision, just because one was not able to read and understand certain contractual clauses correctly.
It is no shame to be unfamiliar with the credit system, contracts that can often have far-reaching consequences, but should also be understood in their subtleties. Therefore, it is advisable to ask for any ambiguity before signing any loan agreement. While it should not be assumed that all lenders are only interested in ruining theirs, they certainly do not want to give them anything.
5. The conclusion: Both possibilities can be advantageous
When it comes to the question of whether an increase or a new loan makes more sense, it must be pointed out that these are actually conflicting interests of borrower and lender.
If the conditions for a new loan are more favorable than for the existing one, the borrower has a legitimate interest in concluding a new loan and possibly reposting it. The lender, on the other hand, would benefit from an increase in the higher interest rate loan.
On the other hand, the lender will argue for an existing loan with lower interest rates that a top-up would be a change in the existing loan agreement, and thus the fixed interest rates would have to be adjusted.
The final decision depends on the negotiating skills of the borrower. The simplest and least time-consuming solution will probably be to conclude a new loan with the existing credit institution.