Step 1: collect existing loan documents
To make the transfer smoothly, you first have to collect all the necessary documents from your existing expensive loan. The loan contract and a recent print-out of the outstanding balance is sufficient. How much have you repaid so far? You will certainly save money if you currently have 1 or more loans of 2,500 euros or more outstanding, plus a credit card and / or a red debit on your checking account.
Step 2: determine your new loan objectives
You don’t just take out a loan to be cheaper. You can usually also borrow extra money at a lower interest rate. If you want to borrow extra money you need to know for what purpose you want to do this. Be realistic in how far you can go in terms of loan amount. Example: If you have an existing loan of 5,000 euros and you want to borrow 2,500 euros, you will end up with a new loan of 7,500 euros. If you can carry this loan, you will manage this new loan sum during the transfer.
Step 3: Compare providers with a savings check
This speaks for itself, but is a crucial step. Compare online lenders by doing a savings check on their websites. Online lenders compete well with each other and are a lot cheaper than the established order of Hetty Sorrelen. Example: Do you want to refinance an ING loan? Keep your current interest rate in mind and compare the cheapest providers with each other that are furthest below this interest rate. Record these providers in a short list and see if they have extra closing costs or penalty clauses.
Step 4: request quotes
This is the best part: requesting quotes. You can’t actually do anything wrong here. You simply request quotes without obligation and free of charge from the providers that you have put on your list. Of course, state all the details of your existing loan and upload the necessary personal details. Choose those providers who not only have the most favorable conditions, but who also feel the best with regard to personal advice. The quality of customer service is important when you have questions.
Step 5: choose the best party
In this very important final step you dive into all proposals (tenders). You first compare them to the amount of interest and any closing costs. You then read the fine print and look for fines that you can receive in the event of early repayment or a new transfer. Then contact the party that offers the best total package. Ask by telephone if there are any important issues that you have been able to overlook that have an impact on costs.
Which loans can I / cannot transfer?
One or more personal loans can be taken out as long as the minimum term has expired . This type of loan has a fixed term, interest rate and monthly charges.
This duration is at least 1 year but often longer. You pay a fine for early termination, which makes re-financing financially unattractive. Important in this regard: if the fine is higher than the amount to be saved, then it may be wise to wait.
Transferring revolving credit is much more lucrative . Due to the variable interest rate and short term, it does not matter as much for your existing loan provider as you decide to leave. Reshaping is usually free of penalties and that is nice.
Advantages and disadvantages of rescheduling
Transferring or merging loans or credit has several advantages :
- Everything in one overview with one party
- Lower interest and monthly charges
- Borrowing extra money
- Financial advice*
* Financial advice is not self-evident nowadays. The low interest rates are achieved by providing no advice. This saves on the hourly wages of advisers. It can also be a disadvantage for you if you want proper advice.
There are of course disadvantages too. Fortunately they are not all expressed:
- Overriding with negative BKR is not possible
- Time wasted because you are not accepted
- Advice costs can be charged
- Re-skipping without advice can result in the wrong choice
- Loans due to fines difficult to refrain (compared to credit)
When are you really going to save money by rescheduling?
The biggest win is in the lower interest costs that you will pay monthly. This is the primary reason for transferring credit. The interest on your current loan was determined a few years ago, which can now be a lot lower.
Always check the level of the statutory interest so that you are sure that you are not too close to the maximum interest.
The amount of the interest depends on the total loan amount. The higher the loan amount, the lower the interest. The interest on a loan of 10,000 euros will be higher than the interest on a loan of 100,000 euros. In 2019 that is about 6% versus 4%.
Calculation example 1
Imagine that you have two loans outstanding. A loan of 5,000 euros with 8% interest and a loan of 10,000 euros with 7% interest. In total you pay per year in costs: (5,000 x 0.08 = 400 euros) + (10,000 x 0.07 = 700 euros) = 1100 euros per year (92 euros per month) .
After comparing, you decide to merge the loans into one loan of 15,000 euros with one new loan provider at an interest rate of 6% (average interest 2019). The duration: 12 months. The loan then costs: 15,000 x 0.06 = 900 euros per year (75 euros per month).
This saves you 200 euros on an annual basis.
Refinancing and borrowing money
If you are able to continue to bear the higher costs, you can also transfer and borrow your loan. This way you increase your credit at the same monthly interest costs.
Borrowing can be beneficial, but make no mistake in the market. This can suddenly become active with a negative impact on interest. With a revolving credit, the interest rate would rise actively and your costs would increase.
If you are not sure whether you can bear the costs, keep a cash book and find out if you have any money left over.
Influence of the duration on costs
The duration plays an important role. The longer the term, the longer you continue to pay interest, which increases costs. This is despite the lower interest rate (!).
It is therefore crucial that you keep the duration as short as possible. So compare different maturities in combination with the amount of the corresponding interest.
Calculation example 2
Suppose you get two offers for the loan of 15,000 euros where the duration and interest differ:
- Loan sum: 15,000 euros
- Duration: 12 months
- Interest: 6%
- Total costs per year: 479 euros
- Total costs per month: 40 euros
- Loan sum: 15,000 euros
- Duration: 24 months
- Interest: 5%
- Total costs per year: 776 euros
- Total cost per month: 32 euros
Although the interest rate on offer 2 is lower, the longer duration ensures higher total costs . Every month you spend a little less but at the end of the ride the loan has cost you more money.
If you are financially able to choose the duration of 12 months, then it is absolutely preferred.
The established Hetty Sorrelen use a higher interest rate than online prize fighters. This makes sense because these Hetty Sorrelen have a lot of extra costs such as staff, rent office premises, etc.
The rise of the internet has led to the emergence of online loan providers who have hardly had these costs on the balance sheet. This allows them to offer competitive interest rates and, for example, easily beat ING.
Based on the table below, ING is almost twice as expensive as an online lender, such as Findio, Freo or Santander.
Transferring an ING loan is therefore certainly lucrative. The ABN AMRO is following the flow of lower interest rates and the RaboHetty Sorrel is again more expensive. Interest rates fluctuate by the day and it remains a snapshot.
You can use the well-known online calculation modules for the most current interest rates.
Refinancing alternatives to credit
In addition to refinancing, you can also think of two alternatives that reduce interest costs:
- Transfer loan to mortgage
- Apply for WOZ credit
If you have a mortgage, there is a good chance that your mortgage interest will be a lot lower than the interest on your personal loan or credit. Some people consider having their expensive loan included in their current mortgage.
When is it advisable to transfer a loan into a mortgage?
First of all, your mortgage should not be at the maximum level since the extra loan will increase the mortgage. In addition, additional appraisal costs and notary fees must be cheaper than the costs that the loan now entails. Once you meet these conditions, it is best to contact your mortgage provider to see if you qualify.
A WOZ credit is beneficial for homeowners because you benefit from the low interest rate on your mortgage. Your home as collateral is very valuable for the Hetty Sorrel, which means you can also receive a relatively high credit.
Before you are eligible for a WOZ credit you must first have repaid all your existing loans. This form of credit is therefore only applicable to those who are almost finished paying off.
If you are thinking about renovating your home, borrowing money for a renovation may be the reason to take over existing loans. Certainly when your old loans were taken out many years ago.