The repayment of a loan can take many years and is often not just a financial burden for the debtor. It is all the more interesting that borrowers can significantly reduce the repayment period thanks to special repayments. But what does the special repayment actually mean for different forms of credit, what are the advantages and disadvantages and can it really save money in the long term?
What does special repayment mean?
A special repayment is an early partial repayment of a loan. However, this repayment is subject to a number of restrictions. First of all, special repayment is not always a fundamental right of the debtor. So it depends on the type of loan whether it can be repaid early and in any amount. Furthermore, a special repayment is often clearly limited in its possible amount.
In the case of construction financing, it is around 5% of the total loan amount that can be repaid in the form of a special repayment. Overall, however, online loans are not as high as normal real estate loans.
The special repayment for an installment loan
In the case of an installment loan, there has been a legal and statutory guarantee since 2010 that it can be repaid in part or in full at any time after one month. However, the lender is free to request a so-called prepayment penalty in order to compensate for the lost interest income. This amounts to up to one percent of the net loan amount. Only for terms of less than one year can a maximum of 0.5 percent of the loan amount be claimed in the form of a prepayment penalty.
Special repayment for a building loan
This situation is different in the case of construction finance. In this case, a special repayment must be agreed in the loan agreement right from the start. It also determines whether or from what amount of the special repayment a prepayment penalty is due. In the case of mortgage lending, it is customary that around 5% of the net loan amount can be repaid outside the regular installments, without this leading to additional costs.
A borrower should therefore, on the one hand, endeavor to have this option guaranteed at the beginning of the contract. On the other hand, these early repayments are worthwhile, as this reduces the remaining debt and increases the repayment portion in the monthly annuity.
Variable or fixed special repayments: what needs to be considered here?
There are two types of special repayment. On the one hand there is the variable special repayment; the so-called optional special repayment right. The debtor is free to choose whether and when to exercise the right. The only restrictions are the aforementioned maximum repayment amount and the requirement that an optional special repayment can only be made once a year. Splitting the special repayment over the year is then excluded.
This is opposed to the fixed special repayment. This is a defined provision at the beginning of the contract, when and in what amount the special repayment has to be made. It is therefore a special form of loan repayment that does not give the borrower any additional flexibility during the term. If you have this form of special repayment, we recommend that you always repay the amount as early as possible. The monthly interest charge always results from the current remaining debt. The lower the remaining debt, the lower the interest on it. Since the interest payment is mostly made monthly, the remaining debt from the current month is used accordingly.
What are the advantages and disadvantages of special repayment?
The advantages of the special repayment result from the reduction in interest costs, so that taking out a loan is cheaper overall. The prepayment penalty does not change that much either, since this is usually lower than the interest savings. The gain in planning flexibility for the borrower should also not be underestimated, since the repayment can be adjusted at any time to your own and possibly changing life situation.
The possible additional costs are disadvantageous. These can be collected from banks in the form of the prepayment penalty just mentioned. Fixed special payments can also have a negative impact if they cannot be made at the agreed time.
In conclusion, however, it can be stated that there is no real disadvantage for the customer. could have a financial impact. Due to the special repayment, the customer has much more flexibility with a higher liquidity to reduce the remaining debt. With installment loans, a part can be paid off in one go. In some cases, banks also offer loans with total repayment free of charge. That is, You can pay off the entire loan overnight, without having to pay any fees.
Save money with a special repayment
With a special repayment, the total cost of a loan can be significantly reduced. The following information will help you to benefit from all the benefits of the special repayment and to save money with the early repayment.
On the one hand, a special repayment should only take place as soon as you can be as far as possible sure that the amount of money will not be needed elsewhere in the foreseeable future. Otherwise, another loan agreement would be required for other expenses, which would usually be more expensive than the savings from the special repayment.
In addition, it makes sense to work out various options with different providers in order to subsequently determine which credit institution has the lowest additional costs in the form of a prepayment penalty. In our online loan comparison you will also find numerous banks that do not charge prepayment penalties in the event of a special repayment. Therefore, as a loan seeker, you should ask yourself why you should go to a bank that still charges such fees!
Finally, you should also know that according to a judgment by the Regional Court, the special repayments or the right to repayment must be taken into account even if the debtor has not made a special repayment in the past. Unless it is stipulated in the credit agreement that special repayment that has not been carried out cannot be made up later, these must be taken into account when calculating possible prepayment penalties.