Loan refinancing saves interest and money

A refinancing is particularly sensible when the general interest rate level has fallen significantly, as is currently the case. In many cases it is therefore cheaper to combine various outstanding liabilities or loans into a single item through refinancing.

For a refinancing you take out a cheaper new loan and use that amount to settle the previous liabilities. Through refinancing, your personal finances can be made clearer and cheaper.

MAXDA refinancing in 4 steps

• 1. Start the MAXDA loan calculator
• 2. Find a cheap loan for refinancing
• 3. Take out the refinancing loan and pay off the expensive loan
• 4. Pay only one monthly loan installment\

You don't have to worry about anything! We take care of refinancing your old loans completely and free of charge for you.

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By refinancing you can save a lot of money, for example if you took out a loan years ago that now lies well above the current interest level. Refinancing can also be worthwhile if you have several loans running in parallel, because you can save a lot by consolidating them. Having to service only one loan is not only clearer: depending on the situation you also save real money, because only up-to-date interest applies to a single loan.

Not infrequently, refinancing can save several hundred euros! Our loan experts will gladly help you by phone or on site with your refinancing.

Refinancing – best with MAXDA

Car loans, installment loans and overdrafts are particularly suitable for effective refinancing.

Refinance an expensive loan with MAXDA

Which loan offer is best suited in your individual situation to secure the greatest possible benefits from refinancing? Friendly and experienced staff at the MAXDA service hotline will advise you in detail on refinancing. You will receive a non-binding offer for refinancing shortly after your request, free of charge.

You can then calmly consider whether to take advantage of the refinancing opportunity. Thanks to the low-interest and customer-friendly refinancing loan offers from MAXDA, many satisfied customers have already increased or completely restored their financial freedom.

With MAXDA refinancing you benefit from the excellent contacts and experience of a renowned loan broker. Only the cheapest refinancing offers are passed on to our customers.

If you are unsure whether you should refinance, you can first receive individual advice from MAXDA and use the non-binding offer as an important reference in your financial planning.

Advantages of refinancing

An overdraft on the account, usually called a “dispo”, is also a form of credit. Although this credit offers high flexibility, it is expensively bought, because overdraft interest rates are above average at banks.

If you overdraw your overdraft month after month and pay high interest, it is difficult to get out of this cycle. Incoming salary is often immediately swallowed up by the overdraft and the interest. Refinancing to balance the account is therefore particularly sensible: request your MAXDA refinancing loan now!

After successful approval and payout of the refinancing loan, you balance your account. You then repay the refinancing loan conveniently in small installments that you can set individually in consultation with MAXDA.

Refinancing improves your creditworthiness: Those who consolidate their debts and pay off old loans benefit from an improvement in creditworthiness, because each repaid loan has a positive effect on the Schufa score. If several loans are settled now, this can be rated positively. In addition, the number of total loans decreases, which is also a considerable advantage.

Optimal planning, an overall overview of your finances, pay off expensive loans, up-to-date installments and communication only with one bank: all these advantages speak in favor of refinancing. MAXDA is happy to advise you.

And as always with MAXDA: processing your loan request is free of charge; even in the event of a possible rejection you don't pay a cent!

Important questions about refinancing

In connection with refinancing, individual questions sometimes arise that should be clarified in advance. For this reason, we have listed below the most frequent questions about refinancing and answered them in detail.

How does refinancing work?

Refinancing always involves replacing one or more existing loans with a refinancing loan. This improves the overview of your debts and, when switching loans, you can also save costs on interest. But how exactly does a refinancing proceed? Several steps are required for this purpose:

1. Determine the outstanding balance of the affected loans and calculate the required loan amount
First, you should determine which amount you want or need to finance through refinancing. Therefore it is important to determine the outstanding balance of the respective loans. With almost every loan you receive a repayment schedule that shows you exactly in which month which outstanding balance, which repayment and which interest is to be paid.

The following example shows such a repayment schedule:
We assume a loan of €15,000 with a term of 4 years and an effective annual interest rate of 6.5%. Based on the repayment schedule you could read the outstanding balance after 15 months (here the repayment schedule for the second year is shown):

Table 1: Example of a loan repayment schedule

From this repayment schedule you can see that your outstanding balance at the end of month 15 is still €10,711.55. Thus you know the amount required for your refinancing loan. If you can no longer find the repayment schedule, contacting the respective bank will help. On request, the bank will normally send you a new repayment schedule.

2. Search for attractive refinancing loans
The next step is to look for a loan with the most attractive conditions possible that you can use for your refinancing. It is very helpful to use a loan comparison to find offers with the lowest possible interest rates. What such a loan comparison can achieve is shown in the following example calculation:

Table 2: Comparison calculation refinancing loan vs. old loan

In this example you could save €379.93 in interest by refinancing within 33 months. A very good argument to take this step. MAXDA’s experts compare many loans for you to find your perfect refinancing loan and significantly reduce costs. Contact us and save real money!

3. Check the costs of paying off the old loans
Unfortunately, the calculation is not as simple as described above. As an additional decision criterion, you should include the costs of paying off old loans (in the loan agreement). As a rule, banks charge a prepayment penalty for early termination of the loan. This depends on the remaining term as well as the outstanding balance. In the example above, a prepayment penalty of 1% of the outstanding balance would have to be paid. That would result in the following costs:

Table 3: Calculation of the prepayment penalty for early repayment

If we offset the payoff costs of €107.12 against the savings from the refinancing of €379.93, there is still a saving of €272.81 (interest saving). The refinancing is therefore worthwhile.

The further steps are now to apply for the refinancing loan and use the loan amount to pay off the previous loan.

What determines the amount of the prepayment penalty?

The prepayment penalty is intended to compensate banks for financial losses due to interest not earned. This is always the case when you as a borrower want to repay your loan early. After all, the bank calculated with the full interest and now suddenly receives the money much earlier with interest losses. But what determines the amount of the prepayment penalty? The deciding criteria are:

1. Type of loan
So that banks cannot calculate the prepayment penalty arbitrarily, the legislator has now at least established clear regulations for consumer loans. According to §502 para. 3 BGB the prepayment penalty must not exceed the following amounts:

• Remaining term of more than one year: 1 percent of the amount repaid early (but at most the amount of the nominal interest that the borrower would have paid until the regular end of the loan term)
• Remaining term of less than one year: 0.5 percent of the amount repaid early (but at most the amount of the nominal interest that the borrower would have paid until the regular end of the loan term)

For mortgages, banks have more leeway to calculate the compensation. Loans with variable interest rates, such as an overdraft, can be fully repaid at any time without paying a prepayment penalty.

2. Amount of the repaid loan
The amount of the outstanding balance being repaid is of course the second important criterion. After all, it serves as the basis for calculating the prepayment penalty.

3. Special contractual provisions
Statutory regulations in the credit sector usually serve to protect you as the borrower. Banks, however, do have the option to waive the prepayment penalty. For example, we at MAXDA give you the option to repay your loan early at any time. If your loan agreement also contains a corresponding provision, refinancing may be particularly worthwhile since no costs are involved.

How much money can be saved by refinancing an overdraft?

An overdraft is almost always used as the example to demonstrate the benefits of refinancing. Why is that? This comparison is due to two facts:

1. Overdraft interest rates are normally significantly higher than the rates for conventional installment loans.\
2. An overdraft is rarely repaid gradually, so the interest burden often remains at the same high level.

If you use your overdraft today at a branch bank, interest rates between 8.99% and 12.99% p.a. are not uncommon. In this case refinancing is almost always worthwhile because you benefit from two advantages at once:

• You immediately pay lower interest on your debt
• You repay the loan in installments and thus permanently reduce your interest burden

How this affects you financially is shown in this example:

Over the years you have continually used your overdraft and now have a total debt of €4,500. With your salary receipts you partially balance the overdraft every month, but at the end of the month it’s back at €4,500. Your bank charges 9.99% interest per year, payable quarterly. As an alternative you could take out the refinancing loan mentioned above. If you repay the €4,500 in small installments over 4 years, the financial effect would be as follows:

Table 4: Example calculation of the savings potential from refinancing an overdraft

Because with refinancing you reduce the outstanding balance month by month, the interest burden also decreases over the term. This is not the case with an overdraft, which is why the interest costs in connection with the high interest rate are so extremely high. An overdraft is therefore only useful as a short-term source of financing and should never become a permanent condition.

Refinancing a mortgage – how does it work?

While refinancing for an installment loan can be considered a special case, it is often standard for mortgage financing. This is due to the particular structure of such loans. If you have chosen an annuity loan with a fixed interest rate for your mortgage, the interest rate remains constant during the fixed-rate period.

Colloquially, borrowers and banks refer to the fixed-rate period as the term of the mortgage. As a rule, after the fixed-rate period of 5–25 years there is a remaining balance that must then be financed further. This process is called follow-up financing, for which you have two options:

1. Extension with the previous lender (prolongation)

Here you negotiate a new fixed-rate period with your previous bank, which is oriented to the current interest rate level at the time of follow-up financing. Each bank independently sends offers for follow-up financing to its customers 8–12 months before the fixed-rate period expires. If interest rates have risen since the start of your mortgage, your mortgage will become more expensive. If interest rates have fallen, you will pay less. The burden from the installment will generally be lower anyway because the loan amount has already fallen significantly.

2. Change to another provider (refinancing)

If you are not satisfied with the conditions of your previous bank, you can refinance at follow-up financing. A loan comparison and obtaining various offers are certainly worthwhile. The peculiarity of refinancing mortgages is that no prepayment penalty is due when the fixed-rate period has expired. If, on the other hand, you want to terminate your mortgage early, the bank can (at least within the first 10 years) even refuse this. Early termination is only possible for a compelling reason and often involves high prepayment penalties.
The best tactic for follow-up financing is negotiation. If you have obtained attractive offers from other banks, you can contact your previous lender again and present these offers. Banks often then adjust their interest rates slightly downward to avoid losing customers.

Are refinancing loans cheaper than other loans?

In principle, you can use any conventional installment loan for refinancing. Since the purpose of such loans is usually free, nothing speaks against such a use. However, as with a car loan, it may make sense to inform a bank about your intended use. Some types of use can indeed influence your creditworthiness. With a car loan the positive influence is that you acquire an asset that can be used as collateral if necessary. Other reasons apply to refinancing:

• You swap debt for debt (your total debt level does not increase)
• Some loans may be paid off immediately when consolidating loans, which improves your creditworthiness

  

Although not every lender takes these aspects into account, there are banks that do not assign any negative impact on creditworthiness to the refinancing loan (no deterioration of cost and asset situation). Better scoring with Schufa and in the banks' scoring systems can sometimes mean that you receive better terms for a new loan. This way you save real money and gain additional financial leeway!

Use the statutory right of termination for refinancing loans

If the borrower has agreed a long-term fixed interest rate for fifteen years and now finds that his once top conditions no longer correspond to the market situation, he can still refinance. For this case, the legislator grants him the possibility to refinance the loan after ten years from full receipt of the loan amount.

Section 498 of the German Civil Code (BGB) provides for a borrower's right of termination in this case with a notice period of six months. It can also be worthwhile to renegotiate with the previous lender for a refinancing.

Occasionally borrowers are no longer able to service a loan contract in the agreed form due to their personal financial circumstances. Such a case can arise from illness or unemployment, but divorces or separations from a partner often also have profound financial consequences.

Use refinancing and save money!

Do you have several loans running and want to consolidate them for better clarity? Are you struggling under the high financial burden of your overdraft? In both cases refinancing can be the solution for you. You can improve your overview and, thanks to inexpensive refinancing loans, also save a lot of money. We will help you along the way and find the refinancing loan that fits you perfectly!