Old loans often run at rates nobody would pay today. Whether repaying pays off is decided by a calculation of remaining debt, remaining term, rate difference and prepayment penalty.
In short
- Rule of thumb: from one percentage point of rate difference and at least twelve months remaining, the check is worth it.
- Instalment loans: prepayment penalty at most one percent of remaining debt, 0.5 percent with under twelve months left.
- Always refinance overdrafts and credit cards; the difference is five points and more.
- Mortgage: free to cancel after ten years, before that with a prepayment penalty that often eats everything.
The calculation
You need four figures: remaining debt, remaining term, old APR, new APR. Plus the costs of repayment: prepayment penalty and any fees of the new loan. Example: €15,000 remaining debt, 48 months, 9.5 percent old, 6 percent new. Old interest around €2,960, new interest around €1,880, saving €1,080, penalty €150. That leaves a gain of €930. The loan calculator does this with your figures.
Overdraft and credit card first
Overdraft rates sit at 10 to 13 percent in 2026, credit card rates on partial payment at 15 to 20 percent. Whoever has €3,000 permanently in the overdraft pays €360 of interest a year. An instalment loan of €3,000 at 6 percent over 24 months costs €190 in total. Refinancing is always right here, and the instalment disciplines in a way the overdraft never does.
Bundling several loans
Whoever finances car, furniture and phone separately has three instalments, three rates and has lost the overview. One loan that replaces all often has a better rate because the amount is larger and the credit picture clearer. Careful: do not extend the term, otherwise the instalment falls but total interest rises. The goal is the shortest term with an affordable instalment.
The mortgage
Here the prepayment penalty is not capped. The bank calculates its interest loss until the end of the fixed period; with an old rate above the market rate it can be zero, with an old rate below it several percent of the remaining debt. Ten years after full disbursement you may cancel free of charge with six months’ notice regardless of the fixed period. A forward loan secures today’s rate up to five years before the fixed period ends, for a surcharge. Extending with your own bank is convenient; a switch with refinancing costs of around 0.3 percent for the land charge assignment is often cheaper.
Traps
Refinancing offers with payment protection insurance, longer terms or “fresh money” on top. Whoever repays €12,000 and borrows €15,000 has not refinanced but topped up. Repaying shortly before the end of the term rarely pays either, because with annuity loans the interest falls at the start and almost only repayment runs at the end.
How to proceed
Request the settlement figure with a date from the old bank, make conditions enquiries with two to three new providers, get an offer with the same or shorter term, and the new bank transfers directly to the old one. The whole process takes two weeks and has been legally simple for instalment loans since 2010.
Try it yourself
Loan CalculatorLoan amount, rate, term: monthly instalment, total interest and repayment schedule, also for refinancing.Mortgage CalculatorPrice, federal state, equity, rate and repayment: monthly payment, closing costs and remaining debt after the fixed-rate period.Frequently asked questions
Does refinancing hurt my Schufa score?
No. A repaid loan is reported as settled, a new one as running. The score stays stable with the same total debt.
Can I refinance my mortgage before the fixed period ends?
Yes, with a prepayment penalty. It only pays with a large rate difference and a long remaining fixed period.
What about zero-percent financing?
You do not need to refinance that, just pay it off on time. Only when default interest looms does an instalment loan become interesting.
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