Sometimes either the originally planned loan amount is not sufficient or new financing needs are added. In this case, only one thing helps, increase the credit.
However, we have to distinguish between credit lines, installment loans and overdraft facilities on the one hand and construction financing on the other. What is the procedure and what are the requirements? We would like to answer these questions below.
At the beginning is the credit rating
While the creditworthiness is the main factor for overdraft facilities and credit lines, another factor plays an important role for an installment loan or construction financing. The credit rating may be correct, the schufa file innocent white, is important that the freely available household net income is sufficient to bear the increased rate. With an installment loan, this possible obstacle can be avoided. An extension of the term automatically leads to a decrease in the monthly rate for the same loan amount. In this way, the borrower can create the necessary financial leeway to be able to bear the installments if he wants to increase the loan.
Increase or immediately reschedule?
Who wants to increase its credit, should think also once about it, possibly to reschedule immediately. Possibly a bank can be found, which currently offers more favorable conditions. However, the borrower must take into account that the previous bank may charge an early repayment penalty. This amounts to one percent of the remaining debt if the term is longer than twelve months. If the remaining term of the loan is less than one year, the institutions may still charge 0.5 percent. Consequently, before rescheduling a debt, it is advisable to ask the bank for the following information:
- Amount of the remaining debt on the day on which the redemption is to be made
- Amount of the possible prepayment penalty
If the new loan is more favorable in the monthly installment and with the total costs, even with co-financing of the prepayment penalty, the rescheduling is worthwhile. However, when choosing a new provider, the same applies as with initial financing. The cheapest provider in the overview does not necessarily have to be the cheapest in an individual offer. If the bank is based on creditworthiness-dependent interest rates, the third-place finder can also be the more favorable after individual examination. With this in mind, it definitely makes sense to make several loan inquiries before rescheduling and increasing debt.
The crux with the residual debt insurance
The premium for the residual debt insurance is usually added to the loan amount and financed as well. In the event of a debt restructuring, the portion of the premium not yet "used" is forfeited. If the borrower also wants a residual debt insurance for the new loan, he must pay the premium in full on the entire loan amount again.
Top up with the previous bank
If the borrower only wants to increase the loan without changing the bank, these factors are of course irrelevant. In this case, it is sufficient to do the budget calculation yourself to see if the net income still offers enough room for maneuver. Some banks even allow to increase the existing loan without going through major formalities. You send a new loan application with the changed amounts based on a phone call.
Special case of construction financing
Especially in the case of new buildings or renovations, it may happen that a builder has to increase his credit. Months of half-finished exteriors testify to the fact that the financing of the new building was originally calculated with a very pointed pen. The builders have simply run out of money. In the case of subsequent financing, it plays a role whether the loan-to-value ratio can still be met. If the loan amount exceeds the threshold of 80 percent of the mortgage lending value of the property, some banks find it somewhat difficult to increase the construction financing.
The next point is that renewed costs come to the owner, if he wants to increase the credit. Background is that the land charge must be adjusted accordingly. In this context, there are again costs for the notary and the court.
An alternative would be a so-called housing credit. Banks provide this special loan exclusively to real estate owners. These loans are subject to a residential earmarking requirement. The advantage is that these loans are granted without the need to create a land charge. The interest rate ranges between that of a classic installment loan and the conditions for a mortgage-backed construction loan.