Would you like to increase your loan, reschedule or take out additional credit? Still not sure what you want to choose and which loan option pays off for you?
We want you to make the right decision and introduce you to the individual loan options. Loan top-up and debt restructuring are often synonymous in language usage. Nevertheless, they are very different financial products.
Many people shy away from the additional loan, but this alternative can also combine monetary benefits.
Increase credit – meet additional capital requirements
There could be many reasons for additional money requirements. Low interest rates invite you to borrow money. The range of financing the capital requirements ranges from topping up loans, to rescheduling debt and to applying for additional credit. Loan increase and debt rescheduling equate German language usage, but two very different loan products are hidden behind the terms.
Credit increase means that an existing installment loan or framework loan is increased in total. An amount X comes on the remaining debt “on top”. Depending on the provider, the old conditions are usually retained, provided that the original loan amount would not be exceeded.
Debt restructuring means that an existing loan is replaced by a new loan prematurely. As a result of the loan repayment, all old loan terms are lost.
It is not guaranteed whether there is a choice between topping up a loan or rescheduling with the “old provider”. Most credit institutions rule out that a second additional installment loan is granted to cover the credit needs. Whether debt rescheduling or an increase would be possible is also specified in the credit and terms and conditions.
Credit increase or debt restructuring – consumer perspective
Of course, every consumer endeavors to finance as cheaply as possible. Whether a loan or an increase in existing credit is eligible – and at what credit terms – depends on your personal credit rating. It has been some time since the last borrowing, and the credit rating may have improved or deteriorated.
It depends on whether the old contract offers more favorable conditions than a debt rescheduling loan, whether topping up a loan or rescheduling a loan makes more sense. A free credit comparison would be recommended as a decision-making aid. The required loan amount (redemption amount + additional credit requirement), as well as the planned term and the intended purpose would be entered in the comparison calculator.
A non-binding preliminary credit inquiry ensures whether debt rescheduling is possible at the desired credit terms. It would be important to make the preliminary credit inquiry “non-binding”, as binding loan requests have a negative impact on creditworthiness. For larger loan requests, it may be worthwhile to apply for a loan with two people with regard to the interest rates.
Additional credit instead of an increase in credit – advantages?
Everyone can redeem credit prematurely, according to the law. But not all costs are automatically retroactive. It would be really expensive to repay or top up a loan if the old debt was insured. Residual debt insurance varies in price depending on age and risk. But the RSV costs about 10 percent of the original sum insured per borrower.
With an original loan amount of, for example, 20,000 dollars, insurance contributions of 2,000 dollars were paid. Topping up a loan with a half-paid loan would mean a loss of approximately USD 1,000 in insurance premiums. “Unused” insurance coverage would not even be transferable if the increase was made. To “recoup” the loss through lower interest rates is virtually impossible.
An additional loan, even if the effective annual interest rates were somewhat higher, is simply cheaper in this case. Borrowers who would qualify for debt rescheduling or topping up should not fear problems with additional borrowing. A maximum credit line can be calculated for each person. It is irrelevant whether this sum is spread over several loans or combined in one loan.
Top up with negative credit rating – increase foreign credit
Top up credit is not equally easy in all creditworthiness situations. With regular installment loans, the scope for credit increases remains large. With negative credit rating, the first loan search was difficult. Basically, the foreign bank offers a model for increasing credit.
The original loan amount can be increased again. However, the increase is only permitted if the framework conditions are tight. A basic requirement would be that the old contract was always served as agreed. An increase to USD 3,500 is possible at the earliest with a remaining debt of USD 1,500. If the original amount was 5,000 dollars, the earliest point in time would be a residual debt of 2,000 dollars.
In principle, the same documents would have to be submitted as for the initial application. Only the minimum length of service may be significantly shorter. It is 4 months for a credit increase of 3,500 dollars and 7 months for 5,000 dollars. But the probationary period for the permanent employment relationship must definitely be passed.