Repayment of loan means repaying a loan. Once you have taken out a loan , whether it is a mortgage loan or a consumer loan, the loan must of course be redeemed. This can be done in several different ways.
The following provides an adequate guide on what to pay attention to when repaying loans.
Ordinary and extraordinary repayment of loans
A loan can be redeemed in several ways. If the repayment is made at the loan’s agreed expiry, this is called an ordinary repayment. The time of repayment is always agreed with one’s bank or loan institution.
If, on the other hand, you want to pay off your loan before the loan period ends, this is called extraordinary repayment of loans. If, for example, you have received air in the budget, you can choose to repay the remaining amount in advance. This way you can get rid of your debt and maybe even save money.
Different types of extraordinary repayment
Extraordinary repayment of loans can take place in several ways. Since there are many different loans, there are also different ways of paying out loans in advance.
However, one must always be aware of whether fees are included in connection with paying the loan ahead of time.
Extraordinary repayment at a collectible loan
If, for example, you have several loans with high interest rates, but would like to secure a lower interest rate, a collective loan may in some cases be advantageous. In the case of collective loans, one loan is taken from a bank, which can be used to redeem the other small loans.
Let us assume, for example, that you have taken loans three different places for a total value of DKK 100,000. You are tired of the high interest rates and would like to find a better solution. If you contact your bank, they can probably give you an offer to collect the loans from them, thereby securing a lower interest rate.
It is not always an advantage and you have to consider your finances. Often it will be the rewarding bank that assesses whether one meets the requirements for a collective loan.
Extraordinary repayment by settlement and rescheduling
In addition, extraordinary repayment of loans can be made in connection with settlement. This can, for example, be the case when selling a home. Here, any mortgage loan or home loan in the bank must usually be redeemed, unless otherwise agreed with the buyer.
Extraordinary repayments can also be made by converting loans. If you stay in your house, you can choose to convert the loan into it if a lower interest rate can be obtained. This is done by redeeming the existing loan with a new loan. More about mortgages later.
Extraordinary repayment of car loans and consumer loans
Let’s assume you just got a new job. However, there is far from home to work, so you need a car right now and here. You do not have the money to fund the purchase right away, but you know that the salary from the new job can do it in the longer term. Here you can choose to take a car loan .
Once the car loan is taken, the car bought and there is better room in the budget, you can choose to redeem the loan before time. As with other loans, you can also choose to follow the maturity of an ordinary repayment with a car loan.
In connection with repayment of consumer loans, the same applies as for repayment of car loans. We can assume the same scenario as before, but with a new flat screen TV and surround sound system instead. As soon as there is advice, the amount owed can either be repaid before time or at the end of the loan term.
Repayment of mortgages and mortgages
When repaying mortgages and mortgages you have to make some extra considerations.
A mortgage loan can be taken in connection with the purchase of a new home. The loan takes you to a mortgage credit institution and the maturity is often 20-30 years. As a rule, a mortgage loan accounts for 80% of the value of the home, after which the last 20% must be paid via own payment or bank loan. Most often at least 5% of the value of the dwelling must be covered by own payment.
Alternatively, you can take a home loan when buying a new home. Unlike a mortgage loan, a mortgage is taken out in a bank. This option is relatively new, as it was previously only possible to borrow up to 20% of the value of the home by bank loans. That is, 100% of the property’s value can be paid via a bank loan.
Ordinary and extraordinary repayment applies to both loan types. Worth noting, however, is that the mortgage loan can be wound up and rescheduled, but not terminated. If one’s financial situation changes, a mortgage loan may be terminated by the bank during the term.
Mortgage and mortgage loan difference
Unlike bank loans, mortgage loans are dependent on bonds. A bond is a debt instrument or security that allows a borrower to retrieve capital from a lender. The owner of the bond is the lender, and the issuer of the bond is the borrower.
Bonds are most often issued by the state, but can also be issued by mortgage credit institutions and companies. Each bond has a maturity, interest and value. The value of the bond consists of the total benefits and is deducted during the term. The interest rate can be either fixed or variable depending on the terms of the bond.
In addition, mortgage credit institutions require a fee for administering loans, which are called contribution rates. This rate is agreed upon when the loan is taken, and may, for example, depend on the size of the loan.
On the other hand, a mortgage loan at the bank does not require a contribution. However, the bank takes payment for it, it costs them to manage the loan through the interest rate and a supplement.
Redemption at course 100
When redeeming mortgage loans before time, it is important to consider the price of the bonds. One price is the price of a given bond. The price is therefore affected by the price, but also by the interest rate.
The interest rate on mortgage loans may change from year to year. If interest rates are low, it may be advantageous to take a fixed rate loan. If, on the other hand, the interest rate is high, it would most often make sense to take out a variable rate loan.
How does course 100 work?
As a borrower, you are wise to be aware of whether the bond is issued at a price of 100. Course 100 means that you get paid DKK 100 when you borrow SEK 100. when you borrow 100 kr. This means that you lose money in the longer term.
If you borrow one million at the price of 99, you will only receive DKK 990,000. course 100.
Advantages of redeeming loans in advance
So why can it be a good idea to redeem your loan ahead of time? First of all, you are sure that you will not end up as a bad payer. Are you constantly aware that your budget must be added after being able to repay the loan, you avoid ending up in the RKI .
As mentioned, you have to consider more. For example, if you have a consumer loan, it may be a good idea to pay out the loan ahead of time if you have:
- Air in the economy to redeem the loan so that future interest rates can be avoided
- Found a cheaper loan that can repay the previous loan
Prepayment of mortgage loans in advance
In connection with mortgage loans, it is of course best to borrow when the bonds are as close to course 100 as possible. You must also be aware of this if you want to redeem the loan.
First of all, it is best to contact your mortgage bank before doing anything. Since there are many factors to consider, it can easily become confusing. There are, however, a few rules of thumb that you can stick to.
Fixed or variable interest rate
It is important to be aware that there is a difference between redeeming fixed-rate loans and interest-rate loans, that is, loans with fixed or variable interest rates. If the price of a bond is 99, you can only pay 99 kr. Of a bond debt of 100 kr.
If the price exceeds 100, there is no gain. On the contrary, at a price of 101, you must pay back DKK 101 of DKK 100. However, it is possible to redeem at a price of 100, as long as the mortgage-credit institution is informed no later than two months before the semester.
However, if the price is 99, you pay DKK 99 back of DKK 99. The same applies if the price is more than 100. That is, there is no immediate advantage in that connection. redeem ahead of time.