Loan repayment with another bank: save on interest online and optimise your finances
24/05/2025
7
Minutes
Katrin Straub
Managing Director at nextsure
For years, you pay off a loan, but the interest rates agreed at the time are now far too high. Refinancing with another bank can save you hundreds or even thousands of euros. Find out how to make the switch easily online and which legal requirements you should be aware of.
The topic in brief and concise terms
Refinancing a loan with another bank often pays off even with an interest rate advantage of 0.2 percentage points, as the savings outweigh the costs.
The early repayment compensation for instalment loans is legally capped at a maximum of one per cent of the remaining balance, making the switch predictable.
The entire refinancing process, including document upload and identity verification, can now be completed entirely online.
The basics: What repaying a loan means for you
Loan refinancing, often also called debt restructuring, is the transfer of an existing loan to a new bank on better terms. The aim is to reduce the monthly burden through a lower interest rate or shorten the term. As a rule of thumb, refinancing is already worthwhile if the new loan interest rate is only 0.2 percentage points below the old one. In most cases, the interest savings then outweigh the potential switching costs.
The benefits of successful refinancing are varied and go beyond pure interest savings. Here are the four most important points:
Lower monthly instalment: Lower interest rates reduce your regular financial burden.
Better overview: Combine several small loans into a single one and keep track of everything.
Faster freedom from debt: With the same instalment and a lower interest rate, you will pay off the loan more quickly.
More flexibility: In the new contract, adapt the term and instalment amount to your current life situation.
This strategic step allows you to actively improve your financial health instead of being tied to outdated and expensive contracts. The next section shows you how this process works in practice.
The process: Switch your loan online in four steps
Arranging a loan redemption with another bank is a clearly structured process that can now largely be handled digitally. First, you should review the terms of your existing contract, especially the outstanding balance and notice periods. You can then obtain various offers via online comparison calculators, with the effective annual interest rate being the key factor for comparison. If you have found a suitable offer, you can submit the application directly online.
In most cases, you only need a few documents for the application. Most banks require the following documents:
Proof of income for the last two to three months.
A copy of the existing loan agreement.
A redemption statement from your old bank showing the exact outstanding amount.
A signed redemption authorisation so that the new bank can redeem the old loan directly.
Many of these documents, such as bank statements, can be uploaded directly in the online application. After approval, the new lender transfers the amount directly to the old bank and thereby settles the liability. A digital loan enquiry speeds up this process considerably. But before you switch, you need to be aware of a possible hurdle: the early repayment charge.
Keeping an eye on costs: understanding early repayment charges
If you repay an instalment loan before the end of the agreed term, the bank loses expected interest income. As compensation, it may charge a so-called early repayment compensation. The amount of this fee is, however, capped by law to protect consumers. Under Section 502 of the German Civil Code (BGB), the compensation may amount to a maximum of one per cent of the outstanding remaining balance. If your loan term has less than twelve months remaining, this rate falls to 0.5 per cent.
An example makes this clear: with an outstanding balance of €10,000 and more than a year remaining on the term, the bank could charge a maximum fee of €100. These costs are often significantly lower than the interest savings from the new, cheaper loan. A careful comparison is therefore crucial. With an online tool, you can calculate the early repayment compensation and weigh it against your potential savings. The exact legal basis also gives you additional certainty.
Legal basics and expert tips for refinancing
The German Civil Code (BGB) clearly regulates the framework for early loan repayment. In addition to the cap on early repayment charges for consumer loans (§ 502 BGB), there is a special right to terminate loans with long fixed-interest periods. Under § 489 BGB, you can terminate any credit agreement with a fixed interest rate term of more than ten years once those ten years have elapsed, giving six months’ notice – completely free of additional charges. This applies in particular to older property finance agreements.
Our expert tip: Check your old loan agreement for formal errors, especially in the withdrawal notice. Contracts concluded after 20 March 2016 must contain precise details on how the early repayment charge is calculated. If these are missing, the bank’s claim to compensation may lapse. Such a review can be worth real money when refinancing an old loan. With this knowledge, you can specifically identify the situations in which settling the loan pays off the most.
Typical use cases: When refinancing a loan is especially worthwhile
Loan refinancing is not the best solution in every situation, but in certain cases it offers considerable financial advantages. Especially when current market interest rates are significantly below the interest rate of your old contract, the savings potential is high. Even a difference of one percentage point can mean savings of several hundred euros over the years. Debt consolidation is one of the most common reasons for refinancing.
Here are three scenarios in which refinancing is particularly worthwhile:
Bundle multiple loans: Are you repaying several small personal loans or credit card debts? By combining several loans, you often get a better interest rate and only have one instalment to manage.
Replace expensive overdraft facility: Your current account overdraft is extremely expensive, with interest rates of more than ten per cent. A low-cost personal loan is almost always the better alternative here to bring the account back into balance.
Adapting to a change in circumstances: Has your income increased and you want to pay off the loan more quickly? Or do you need to reduce your monthly instalment because of new financial commitments? Refinancing makes this flexibility possible.
These examples show how targeted loan refinancing can improve your financial position, and digital processes make this easier today than ever before.
The digital advantage: How nextsure simplifies the process
The days of time-consuming paperwork and appointments at bank branches are over. Thanks to digital processes, refinancing a loan with another bank can be managed quickly and easily from home. As a digital insurance and finance portal, nextsure focuses on exactly this efficiency. We provide you with the tools to analyse your finances transparently and identify opportunities for optimisation. The entire process, from requesting a quote to concluding the contract, is designed for a simple and user-friendly online experience.
You can compare various loan options and securely upload the necessary documents in just a few clicks. By stating the purpose of use “refinancing” in your application, you signal to the new bank that you want to reorganise your existing liabilities rather than increase them. This often improves your chances of approval on top terms. Use our expertise to assess your financial situation and make the right decisions for your future.
Request your personalised risk analysis now: Have your financial situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive overview of the term debt restructuring and its meaning.
Statistisches Bundesamt (Destatis) provides datasets on loans and online transactions that offer statistical insights.
Statista offers statistical data and forecasts on loans and debt.
Deutsche Bundesbank shows current interest rates and yields for consumer loans to private households.
Verbraucherzentrale explains the rights of borrowers in credit agreements and provides important guidance.
Stiftung Warentest offers independent tests and comparisons of various loans.
Stiftung Warentest provides detailed information on the repayment of construction loans and the permissible amount of prepayment compensation.
Europäische Zentralbank (EZB) contains statistical data on interest rates for loans to households and businesses.
FAQ
How long does it take to pay off a loan with another bank?
The process can move very quickly. After the online application and the digital submission of all documents, the review and payout often take only a few working days. The entire process is usually completed within one to two weeks.
Does debt restructuring improve my SCHUFA score?
In the short term, the credit enquiry can slightly affect the score. In the long term, consolidating several loans into a single one can have a positive effect on your SCHUFA score, as it indicates financial stability and a better overview.
Can I increase the loan amount when refinancing?
Yes, that is possible. As part of the refinancing, you can apply to the new bank for a higher loan amount than is necessary to pay off the existing loan. The prerequisite is appropriate creditworthiness.
Do I need to cancel the old loan myself?
No, in most cases not. If you give the new bank a redemption authorisation, it will take care of all communication with the old bank, including the termination and repayment of the loan.
What happens to my residual debt insurance?
If you repay your old loan, you can usually cancel any related residual debt insurance. You may even receive part of the premiums already paid back, which means additional savings.
Is refinancing also worthwhile for small loans?
Yes, even with smaller loan amounts, refinancing can be worthwhile, especially if you are paying off an expensive overdraft facility or credit card debt. The difference in interest rates is often particularly high here and leads to noticeable relief.
