Refinancing a loan: when switching to Anadi makes sense
Refinancing replaces one or more existing loans with a new one. Done well, it lowers your costs or simplifies your finances. Done badly, it just stretches the debt out. Here is how to tell the difference.
At a glance
- Refinancing (Kredit umschulden) pays off old debts with a new consumer loan.
- It often makes sense for expensive overdrafts, credit card balances or older, pricier loans.
- Compare total cost, not just the monthly instalment.
How refinancing works
You take out a new loan, for example an Anadi online loan, and use it to repay one or more existing debts in full. From then on you have a single lender, a single instalment and, ideally, a lower interest rate. Anadi Bank publishes its own explainer on refinancing on its official site, and its loan can be used for this purpose.
Debts that are worth refinancing
- Overdrafts. Arranged overdraft rates are usually much higher than consumer loan rates.
- Credit card balances that you carry from month to month.
- Several small loans or instalment plans, where combining them reduces fees and admin.
- Older loans taken out when rates were higher, if early repayment costs are low.
Costs to check before you switch
Look at three numbers for each existing debt: the outstanding balance, the remaining term and any early repayment fee. Then compare them with the new offer's effective annual interest rate (effektiver Jahreszins) and the total amount payable. A lower monthly payment is not a saving if you pay for much longer. A simple rule: the new loan should cost less in total, including all fees, than keeping the old debts.
A worked example
Suppose you owe €4,000 on an overdraft and €6,000 on an older instalment loan. Instead of two payments at different rates, you take a €10,000 loan over a similar period at a lower effective rate. If the total repayable is lower than what you would have paid on both existing debts combined, and you close the overdraft facility or keep it at zero, the switch works in your favour. The figures here are illustrative only; always use real numbers from your own contracts and a current offer.
Avoid the common trap
Refinancing frees up your overdraft or card limit. If you run those balances up again, you end up with the new loan and the old debts. Consider reducing the limits once they are paid off.
Questions readers ask
Can I refinance loans from other banks with Anadi?
Anadi's consumer loan can be used to pay off existing debts, subject to its credit assessment. Check the current conditions on the official refinancing page.
Does refinancing hurt my credit rating?
A new application involves a credit check. Replacing several debts with one well-managed loan does not in itself count against you, but missed payments do.
Figures, rates and conditions change. The binding information is on the official Anadi Bank website, which you should open by typing anadibank.com into your browser. Banoblog is independent and not affiliated with the bank.