Debt rescheduling – when is the right time?

Dana – Wednesday, May 11, 2022 – 11:36 am

If you are one of those people who took out an installment loan years ago, you are probably paying comparatively high interest rates. That’s why it can be worth replacing old loans with new ones. This is called debt restructuring. You can find out what a debt restructuring loan is and when it is worthwhile in the following article.

What is debt restructuring?

At its core, debt restructuring is the replacement of a loan or several loans by taking out a new loan. As a rule, the new loan has a significantly lower interest rate than the old loan. This will reduce the monthly financial burden and you will be able to save real money. The interest on your installment loan, which you took out a long time ago, can usually be improved. The lower the interest rate, the less you have to pay back to the bank. Since interest rates on loans have fallen constantly in recent years, you can take advantage of this fact by rescheduling. If you are interested in a debt restructuring loan, you have the opportunity to find the right option for you with the support of LoanScouter.

Can a loan be repaid early?

In principle, every installment loan can be replaced by a new loan. As a consumer, you have the right to repay your loan to the lender at any time. However, this only applies if you signed the loan agreement after June 11, 2010. Also note that you may have to pay a not inconsiderable prepayment penalty. The amount depends on the remaining debt. With a remaining loan term of more than twelve months, the bank may demand a maximum of 1% of the remaining debt. If the contract runs for less than twelve months, it is 0.5%.

Which loans can be rescheduled?

All loans can be rescheduled to take advantage of the low interest rates.
This includes in particular:

  • Discredit
  • construction financing
  • personal loan
  • installment loans

It is irrelevant which wishes you have fulfilled by taking out the loan. You can redeem both the loan to finance the luxury handbag and the loan to fulfill your dream home. However, taking out a debt restructuring loan is particularly worthwhile in some cases.

When is taking out a debt restructuring loan particularly worthwhile?

Replacing old loans is worthwhile if the total cost of the new loan is lower. In most cases, this is when the new loan is 0.2% cheaper than the old one. Debt restructuring is also recommended in the following situations:

  • With the permanent use of an overdraft facility
  • In the presence of several individual loans
  • With improved creditworthiness

The interest rate for overdraft facilities is sometimes just under 10%. Installment loans, on the other hand, are currently significantly cheaper. This can result in significant savings. Especially if you don’t just use the dispo for a short time, but permanently. Furthermore, by bundling the existing loans, you get a better overview of your financial situation. The monthly charge is shown transparently and the installments are debited at a fixed date. Credit bureaus such as the Schufa assess your creditworthiness better if you have only taken out a loan. This improves your starting position if you need another loan in the future.

Conclusion: Taking out a retraining loan is worth it

Restructure your debt if your checking account is permanently in the red, you want to improve your Schufa score and don’t want to lose track of your financial situation. Thanks to the lower interest rates, more money remains in your wallet.