No credit bank today will want to do without such a reference. Consumers don’t just look at low effective interest rates. They also want the freedom to redeem the loan in whole or in part during the term, provided that their personal and economic circumstances allow it. In order to meet the wishes of their customers, banks have adjusted their conditions in different ways:
Special payments, early loan repayment, installment deferrals, and deferrals, repayments and rate increases, loan extensions, and extended cancellation rights are customary side agreements in loan agreements.
- Pay attention to possible costs, which can sometimes be hidden. Compare different offers with the same free flexibility features. Choose the offer with the lowest effective interest rates.
- There are banks that offer open or hidden two “types of credit”: a “normal version” and a flexible “deluxe version”.
Flexible repayment: special repayment and early loan repayment
The special repayment is a repayment payment in addition to the regular repayment. Special payments during the loan term can have two effects. If the monthly loan rate remains the same, the term is shortened and the total cost of the loan is reduced. However, it is also possible to reduce the monthly installment payment with the same term.
Most banks only offer the first variant. Some banks allow voting rights. From an economic point of view, a shortening of the term should always be chosen.
Banks do not allow special repayments without limit. The following restrictions are common:
- The absolute amount of the free special repayments can be limited (for example up to 80 percent of the remaining amount)
- The number of possible free special repayments in a certain period can be limited.
- A waiting period is also possible (… not before the end of a year after the contract is concluded).
- The amount of individual free special payments can be limited.
- A distinction can be made between free special payments that are only possible to a limited extent and special payments that trigger a prepayment penalty.
Special repayments and repayments are possible at any time. But they are free of charge only once a year in the amount of up to 50 percent of the remaining loan amount. Compared to other banks, this offer is still quite generous – despite the somewhat misleading wording.
Early loan repayment means the full repayment of the remaining debt before the term expires. In practice, it is an early termination. Few banks provide free loan repayment of the entire remaining amount. Some offer loan repayment against prepayment penalties.
Repayment: flexible installment payments
The rate can be changed in different ways, for example by changing the term, through special repayments while maintaining the originally agreed term or through a subsequent additional agreement on a change in the rate and term. A change of repayment is a frequently chosen route, especially in the case of construction finance.
The borrower is granted an option by contractual agreement to change the agreed repayment rates during the fixed interest period at certain intervals within a specified margin. For example, it is stipulated that the borrower can change the repayment twice in a margin between 2 and 5 percent.
If the repayment rate is increased, more must be paid each month and the term is shortened. If the repayment rate is reduced, less has to be paid each month, but the term is extended.
While special repayments leave the agreed repayment rate unaffected and are a one-off process, the repayment change is permanent and can only be reversed by making another repayment change in the opposite direction.
- Choose offers that allow free repayment changes. Sometimes interest premiums are charged from the outset, or there are special fees for exercising the option to switch repayments.
- Make use of the repayment change only if your personal and economic circumstances change sustainably. In other cases, special repayments are more appropriate.
Suspension of repayment and postponement of repayment
Customers can suspend a rate every 12 months. Postponement of repayment means that the borrower cannot start paying the installments immediately, but only one or more months after the contract is signed if he wants such a delay. If repayments are suspended or delayed, the period until full repayment is extended unless the suspended repayments are made up later with special payments. The result is an increase in the cost of the loan.
Some banks only grant a suspension of repayment after consultation. If a borrower gets into financial difficulties and can no longer pay the installments in full, he should always contact his bank in good time.
Most of the time, short-term repayments are not enough to get financial problems under control, and more fundamental solutions are needed. Under no circumstances should you close your eyes and simply stop making payments. In addition to other problems, a sustained delay in payment regularly leads to Credit Checker entries and negative creditworthiness.