If a loan is taken out despite existing loans,
It can serve two different purposes. On the one hand, the new loan can be used to completely replace the existing loans, on the other hand, the loan can also be used for separate financing. In any case, taking out several loans is not always easy, because the creditworthiness of the borrower is already significantly affected by the existing loans.
Ultimately, only your own income can ultimately be used for repayment, which is why several loans could exceed the monthly budget for potential repayments. This is not the case if the new loan is actually used to reschedule the existing loan. These loans are then paid off in their entirety directly from the newly acquired loan amount, which ultimately does not increase the monthly charge, but often even reduces it.
A debt rescheduling only makes sense if the interest burden on the new loan is set lower than on the existing loans. The loan despite existing loans should then actually be clearly defined as a debt rescheduling loan.
In addition to a reduced interest burden, debt restructuring can also make sense because the monthly installments can be readjusted over the term. With a long term, the monthly rates decrease, while with a short term they increase.
Creditworthiness is decisive for several loans
Nevertheless, despite existing loans, a loan is always significantly linked to the borrower’s income. Of course, the Credit Bureau entry also plays a role, but this rather plays a subordinate role, since ultimately it is only a question of whether the borrower can actually cope with the additional monthly burden of his income. Therefore, even with an average income, the bank may want to use a guarantor for the new loan.
This person is then liable for the debt of the borrower with all of their assets and income. Taking out a loan despite existing loans is by no means a rarity in the German economy, because between two and four loans often run in the background for people. This can include the mortgage for the home, but also a leasing model for your own car.
All of these financings are classified as loans, even if the individual modalities differ from one another. If, in addition to these two examples, a further installment loan for liquid funds is taken out, this is also not an unusual circumstance from the bank’s point of view.
Nevertheless, as a lender, the bank must of course secure its investment, which is why a loan can only be pledged if the borrower’s income and thus the creditworthiness is also considered sufficient. The loan, in spite of existing loans, should in any case only be taken out after a preliminary comparison in order to make the financing as cheap as possible.