If you are already servicing a loan, but want to continue to be financially liquid or want to afford a material acquisition, you usually think about an increase in its existing loan. The most common cause of the credit increase is that the loan amount is fully budgeted, as was not taken into account in a real estate financing and any costs. In the vast majority of cases, this is possible if the borrower can afford the new installment. The banks always reckon with an existing borrower that there will eventually be a need for another loan.
Therefore, they also accept the increase usually easily. As with a loan application, the topping up must go through the same procedure. You have to make another application (online or in person at the branch office) and submit the last three payslips or the documents according to which the bank demands again.
A comparison is worthwhile
One should always keep in mind that there are many providers of credit. So it is always worthwhile to compare the offers of different banks thoroughly, because you can certainly save on the rate and the duration of the loan.
It is not mandatory and no one is required to increase the existing loan if a second, cheaper credit can be obtained. You should take the time and compare different loan offers.
If one comes to the conclusion that another bank offers far more favorable conditions but a loan would be expensive, it is best to take a second loan from the competition instead of an increase. The advantage of an increase can be, since it is again a new total amount or a new loan that you can renegotiate interest rates. But you have to be aware that you really have enough financial flexibility to pay for two loans on time.
So before you start skidding and losing track, you should reschedule the existing loan, with possibly better terms, or ask your advisor for an increase and negotiate new installments and maturity.
What can you save on costs / which costs increase?
With a credit increase, it is possible to achieve a reduction in the interest rate. Some banks allow themselves to negotiate. But rather poor is the view on reduction if one comes in a worse classification and the interest rate can even be increased. This happens either when the payment history of the existing loan was untrustworthy. Even with too many loan inquiries one should be careful, because thereby the scoring deteriorates and the creditworthiness worsens thereby.
Anyone who takes out a loan should always plan a room for maneuver, because the monetary and family circumstances can always change. If you suddenly need more money than you’d expect during the loan period, you can raise the available credit. This is done as in a new loan request: For this reason, you should again submit the necessary current documents to the lender.
It is up to you to step up for a loan to another financial institution or bank company other than the one with which you signed the previous contract. However, a loan increase is always about extending an already existing loan.
Interest rate can change
Mostly it is possible for the credit increase to obtain a reduction of the interest rate. However, in very rare constellations, it is possible that the loan increase will also lead to an increase in the interest rate, such as when the financial situation has worsened or when, for example, the financial assessment has been downgraded due to loan requests that follow one another too quickly.
Many banking companies do not lend if they have not completed at least 6 months since the last loan and it has been fully repaid. Too many loan requests also worsen the creditworthiness.
Increase the loan with a new duration
If one extends his loan, one is free to determine the duration of the eradication itself: So one can choose whether one maintains the actual duration, lengthens it or also, if feasible shortened.
A top-up is generally only five to six months after the payment of the original loan conceivable. In theory, one can also begin a trial before, but in fact the chances of success are not very good. The reason is simple: The credit institutions assume that a loan paid out the current financial needs should be given priority. If only a few days a week after the transfer of funds opens a gap again, then interpreting the banks as an unfavorable signal.
Good to know:
If someone needs money again shortly after a credit transfer has been made, the impression can be that he is out of control of his capital. Of course, this does not have to be true, but the banks are interpreting another loan request but quickly in that sense.
Example – Home
As an example of a typical situation, which can lead to an extension of the loan, the construction of a home is explained here. Because this often results in expenses in the construction process, which were not taken into account at the beginning. The settlement of the resulting claims is necessary to continue the construction of the building at all. This is a prime example because the future owner now has no real alternative to paying with further borrowed money.
Here is another example to illustrate with figures: For a current loan, a balance of 18,000 euros must be balanced. If you want to replace these, in addition to increase your monetary space and raise money with a cash advance over 30,000 euros, the process is checked and (hopefully) approved. Once this has been done, the remaining € 18,000 debt will be transferred to the existing credit account. The other 12,000 euros of the new loan will be transferred directly to a corresponding checking account.
Following are 5 helpful tips for extending a loan
Prepare for credit
It makes perfect sense to prepare well for the personal interview with the existing lender. The call can take place at a branch office or on the phone, it depends on whether you are dealing with a traditional branch bank or a direct bank.
No matter whether online credit or loan from a branch bank: A new credit is always a new investigation of creditworthiness, because a loan is legally like a new loan. If the creditworthiness has decreased, this may result in the request for credit increase being rejected.
If the credit rating remains the same or optimized, the options are obviously noticeably better. In addition to the credit check, a professional lender always carries out a new household bill. In addition, it is determined whether an increase is economically acceptable and by what amount the existing loan can be increased at the most.
Banks value loyalty
There are no fixed dates for raising loans. Likewise, notice periods are not crucial. The banking institutions hereby waive a prepayment penalty and dissolve the previous loan agreement with part of the new loan. The cash surplus then serves to repay the new loan.
In theory, there is no upper limit prohibiting a bank client to increase the loan amount yet again, even though the loan has been extended very often. The banking institutions should be more pleased if the clientele shows a certain loyalty and always handles their loans to the same business partner.
Several credit institutions check
Already existing loans can mostly be increased without too much problems. Particularly helpful is an increase when sudden causes occur, for which free capital is needed. If current loans are to be increased, not only should they be requested from the current credit institution, but their terms should be compared with those of other lenders and intermediaries.
Often, these have much better conditions, and whether at the house bank or another financial institution, credit checks on solvency and capital adequacy are always carried out.
Keep an eye on interest rates
A special case are loans with fixed interest rates. Here a loan extension under constant conditions makes sense only if the original interest rate is still competitive at present. Since the interest rates are very low at the moment, old interest rates are often not competitive.
Also in this case, a rescheduling of a new, cheaper loan is recommended. Either this loan comes from the initial financial institution or just another.
Beware of fees
Of course, if the lender turns upside down, other lenders can be in demand. It is also very appropriate to adapt the existing loan if the interest is (too) high. A new loan, whether it’s from the original lender or from a new lender that replaces (reschedules) the old loan, is often the only thought-out financial problem solution.
For the accumulation of an existing loan, many banking institutions require a processing fee, this is also justified. Of course, the processing fees may not be too high. It is worthwhile, at the very latest shortly before the conclusion of the contract, an intensive look into the terms and conditions of the new contract.
If an existing loan is to be replaced with another loan, it should be insisted that the financial institution does not charge any fees. Processing fees are acceptable only for a loan extension.
Always be sure when you use a loan for the first time that you can manage with the respective amount. Otherwise, in most cases offers an increase in the existing loan, which you either get at cheaper interest rates or even worse. Always compare and get offers is the motto.