The interest rate level is rising:
The turnaround on the money and bond market has started at the latest with the EB’s interest rate increase last week. Borrowers, however, do not have to accept rising interest charges. With a suitable restructuring of existing loans, the consequences of rising interest rates remain manageable.
The rising interest rates on the money market mainly concern loans with variable interest rates, where the EB or Euribor interest rates are set as the reference value. In the area of consumer loans, mainly disposition loans and credit lines – including revolving credit lines in connection with credit cards – are affected.
Consumers can protect themselves against rising interest rates by rescheduling fixed rate installment loans. They are still cheap if a good provider is chosen. A installment loan of over 10,000 euros with a term of 36 months and non-cash interest is available at a rate of approx. 5.5 percent interest a year. However, if you accept the first offer, you will quickly pay 10, 11 or even 14 percent interest a year.
When rethinking variable consumer loans into fixed rate installment loans, attention should be paid to continuing flexibility. The installment loan should not only be chargeable without indemnity, but should also be paid without processing fees. The fee is initially charged to the credit account and acts as an increase in the effective interest rate for an early repayment.
Variable-rate real estate loans can now be rescheduled.
The decision on a variable loan has proved retrospectively correct in view of recent years, because interest rates on the money market were exceptionally favorable due to the monetary policy of the EB. However, the variable loan is not a covenant for life: it can be rescheduled into a loan with fixed interest at any time.
Owners should note that, unlike the variable loan, the fixed-rate loan can not be terminated, or can only be canceled against a sometimes very high level of indemnification. If there are special payments in the foreseeable future, the loan should not be completely rescheduled. It is better to continue with a small portion of floating rate financing and stay flexible rather than buy the option on special payments for a high cost premium.