Refinance Santander loan and reduce instalments by up to 30 per cent
30/04/2025
6
Minutes
Katrin Straub
Managing Director at nextsure
Is your monthly loan repayment with Santander Bank too high? Have you been paying off an expensive old loan for years while market interest rates have fallen? Discover how strategic refinancing can reduce your financial burden by up to 30 per cent and help you regain control of your finances.
The topic in brief and concise terms
A refinancing is worthwhile if the new interest rate is at least two percentage points below the old one.
The legally capped early repayment charge is a maximum of one per cent of the remaining debt and is usually lower than the interest savings.
By consolidating several loans (overdraft, credit card), the total monthly burden can often be reduced by more than 20 per cent.
Potential analysis: When refinancing pays off
Refinancing your Santander loan is particularly worthwhile if your agreement was taken out more than two years ago. Interest rates on older loans are often above seven per cent, while new offers are already available from under three per cent. With a remaining balance of €15,000, an interest rate difference of four percentage points can mean savings of over €1,000 over the remaining term. You will achieve the greatest savings the higher the remaining balance and the longer the remaining term is. Refinancing an expensive old loan is therefore an effective lever for optimising your finances. This interest rate difference is the primary driver behind the decision to refinance.
Cost factor for early repayment compensation: A calculable hurdle
If you repay your Santander loan early, the bank incurs a loss of interest, which it charges you as an early repayment fee. The amount of this compensation is clearly regulated by law and, for instalment loans, may not exceed one per cent of the remaining balance. If your loan has less than twelve months remaining, this rate drops to 0.5 per cent. For a remaining balance of €10,000, that would mean a maximum fee of €100. These costs are often significantly lower than the interest savings from the new, cheaper loan. An online calculator for early repayment compensation helps with the exact calculation. The compensation should therefore be viewed as an investment in a lower interest burden.
The path to a cheaper loan: a four-step guide
A successful debt restructuring can be divided into four manageable phases that systematically lead to the goal.
Determine the exact remaining debt: Request a current statement of the remaining debt from Santander Bank, including any early repayment compensation payable.
Compare offers: Use independent comparison portals to find a new loan with the best possible interest rate. Pay attention to the effective annual interest rate.
Conclude the new loan agreement: After a positive credit check, conclude the new, cheaper loan agreement. Many providers now make this fully digital in under ten minutes.
Have the old loan redeemed: The new loan provider transfers the agreed amount directly to Santander Bank and thereby fully redeems the old agreement.
With a new loan with a long term, you can further reduce the monthly burden. The next step deals with consolidating several financings.
Financial clarity: consolidate multiple loans into one
Many households have, in addition to a personal loan, an expensive overdraft or credit cards with interest rates of over ten per cent. Debt restructuring offers the perfect opportunity to bundle these different liabilities. Instead of paying three or four instalments to different creditors, you only have one single, manageable monthly payment. This not only reduces the administrative burden, but often lowers the total costs by more than 20 per cent. By consolidating several loans, you regain financial control. This consolidation is an important step towards financial health.
Expert tips: Maximise savings and avoid pitfalls
To make the full potential of refinancing work for you, you should follow a few expert tips.
Cancel the payment protection insurance: When the old loan is repaid, the insurance purpose of the often expensive payment protection insurance expires. You have a special right of cancellation and are entitled to a pro rata refund of the premium.
Check the withdrawal loophole: Many older loan agreements (before June 2010) contain flawed cancellation notices. A cancellation can completely eliminate the prepayment penalty.
Optimise your SCHUFA score: A good credit score is the prerequisite for top interest rates. Check your entries before submitting the application and have any incorrect data corrected.
State the purpose of the loan: Always specify "refinancing" when applying for a loan. Some banks offer special terms for this, which can be up to two percentage points cheaper.
Even a refinancing despite a negative SCHUFA is possible with specialist providers under certain conditions. The final step is the formal processing with the bank.
The final step: Formal redemption with Santander Bank
Once the new loan agreement has been signed, the redemption of the old loan must be formally initiated. For this, your new financing partner will need a redemption statement issued by Santander Bank. This document lists the exact outstanding balance as of the cut-off date and includes the bank details for the transfer. You can often request this statement directly via Santander online banking in just three clicks. Please allow around five to ten working days for the entire process. Once the old loan has been successfully redeemed, you will receive written confirmation from both banks. The refinancing is then complete and you benefit from your new, lower instalment.
Request your individual risk analysis now: Have your insurance situation checked free of charge and receive concrete recommendations for optimisation.
More useful links
The Federal Statistical Office provides tables and information on over-indebtedness in Germany.
The Deutsche Bundesbank provides statistics on interest rates and yields for consumer loans to private households.
The consumer advice centre offers helpful tips on saving money on loans and credit.
Wikipedia offers a comprehensive article with definitions and explanations on the subject of debt rescheduling.
Statista presents a topic page with current statistics and data on credit and debt.
The Federal Ministry of Finance provides information on federal borrowing in the context of the economic and financial situation.
The consumer advice centre explains the cancellation of loans and the impact of an EU court ruling.
FAQ
What documents do I need for refinancing?
As a rule, you will need the last three payslips, a copy of your employment contract, the existing loan agreement from Santander Bank and a current statement of the outstanding balance.
How long does a debt restructuring take?
The entire process, from submitting the quote request to the final settlement of the existing loan, typically takes between five and ten working days, depending on the speed of the banks involved.
Does debt restructuring improve my SCHUFA score?
In the short term, the credit enquiry can slightly lower the score. In the long term, combining several loans into one and making reliable instalment payments can have a positive effect on your SCHUFA score.
Are fees charged for calculating the early repayment compensation?
No, the bank may not charge any fees for the mere calculation of the compensation. However, an administrative fee may apply for processing the early repayment, which is often between 100 and 200 euros.
Can I also refinance a Santander car loan?
Yes, the rules for refinancing an instalment loan generally also apply to a car loan. You can also repay it early in order to benefit from better interest rates.
What is the difference between the nominal interest rate and the effective interest rate?
The nominal interest rate refers to the pure cost of the borrowed money. The annual percentage rate also includes almost all other costs of the loan, such as processing fees, and is therefore the key figure for comparing loan offers.
