Refinancing a loan: when is switching worthwhile?
Compare the remaining costs of your existing loan with a new offer. Understand settlement amounts, terms, extra borrowing and the refinancing process.
Updated on · Budgetcredit
What does refinancing a loan mean?
When you refinance, a new loan repays an existing loan. Repayment then follows the new contract. This can make sense if terms improve or several commitments can be brought together more clearly. What matters, however, is the overall financial effect from today onwards. Switching does not undo interest already paid.
Refinancing must be distinguished from increasing a loan. If you receive new money in addition to repaying the old loan, the financing requirement increases. You are then no longer comparing only two ways to repay the same debt. Separate the settlement amount and the additional amount requested in your overview.
Budgetcredit offers a refinancing assessment through its dedicated refinancing process. An enquiry is not a promise of better terms.
First establish the correct outstanding balance
Ask your existing lender for a settlement statement for a specific date. A balance on an older account statement may already be outdated. The sum of all remaining monthly instalments is not the same as the outstanding amount payable immediately either, as it may include future interest.
For consumer loans within the Consumer Credit Act (KKG)’s scope, Art. 17 governs early fulfilment: you are entitled to a waiver of interest and an appropriate reduction of costs attributable to the unused loan period. Ask for a clear explanation of the calculation. For agreements outside the KKG, the specific legal and contractual position must be assessed separately.
Record the existing bank, contract number, settlement date, outstanding amount and remaining term. Use current written documents. An estimate is sufficient for an initial conversation, but should not be used for final settlement.
Compare only costs still to come
A simplified example: continuing unchanged would require total payments of 23'100 francs from today. New financing of the same settlement amount would cost 22'400 francs, including all agreed payments. Without further costs or additional borrowing, the calculated difference would be 700 francs. These figures are solely illustrative, not an offer.
Then check whether the new contract includes extra expenses missing from your initial comparison. These may include separately arranged insurance. The time period must also remain visible: a lower monthly instalment resulting from a significantly longer term may cost more overall.
Two comparisons are useful. First: how do total remaining expenses change? Second: how does the monthly burden change? The answers may point in different directions. If you temporarily need more room in your budget, consciously consider the additional overall costs of extending the term.
How to organise the switch
- Obtain an up-to-date settlement statement from the existing lender.
- Have the new financing assessed, including amount, term and complete costs.
- Compare the written offer and terms with continuing the existing loan.
- Clarify the payment route and binding settlement date with those involved.
- After completion, check confirmation of full repayment.
Do not stop existing instalments on your own initiative as soon as you submit a new application. The old payment obligation remains until settlement is confirmed. Clarify who pays the existing loan and how any overlapping instalment is accounted for. This prevents an intended switch from accidentally creating a payment default.
New financing is assessed even when refinancing. Earlier approval does not guarantee a new one. Changed income, new maintenance obligations or additional commitments belong in the current assessment. For KKG loans, the statutory repayment affordability assessment still applies.
When switching offers little help
Refinancing does not solve a persistent deficit between income and living costs. If regular expenses already exceed income without the loan, a new contract may simply shift the problem. Start with a complete budget overview and discuss your situation with the existing lender early.
Caution also makes sense if only a few instalments remain and potential savings are small. The decision should fit the effort and actual benefit. Also check whether a planned additional payout is really necessary. A higher debt may consume the interest saving from a better offer.
Keep the new contract overview and the old loan’s final settlement together. Check the first payment after the switch. A successful switch does not end with a new contract: it ends with correct settlement and repayment you can afford.
Frequently asked questions
Does a lower interest rate always save me money?
Not necessarily. The outstanding balance, term, extra costs and any additional borrowing affect total repayment. Compare all payments remaining from today.
May I repay early?
For loans within the KKG’s scope, Art. 17 provides this right. The settlement reflects the waiver of future interest and the appropriate reduction of term-dependent costs.
When can I stop the old instalment?
Only once settlement and the end of the existing payment obligation are confirmed. A new application alone does not terminate the old contract.
Sources and information date
Information as of 13 October 2026. Provider conditions may change. The individual assessment and contract documents are decisive.
Credit must not be granted if it would lead to over-indebtedness. A budget calculation provides a non-binding indication, not a loan offer.
