A debt rescheduling can make sense if the monthly financial burden is to be reduced. If there are already payment problems, rescheduling can be useful to lower the monthly installments. Debt restructuring should only be considered if the bottom line is savings. It is not just the financial relief that comes from debt restructuring. The currently low interest rate also makes debt restructuring particularly attractive. However, there are a few points to consider when rescheduling. Above all, the question should be answered, what does a debt rescheduling cost and what happens to the old loans.
When may debt restructuring be necessary?
With the rescheduling of existing loans, the borrower should receive a significant financial relief. Even loans that were taken out at the time of the high interest rate phase can be redeemed with a current debt rescheduling. In principle, debt restructuring is a new loan agreement with better terms and summarized in one loan. Therefore, the question should be answered, what does debt restructuring cost? To do this, it is necessary that such costs
- applicable fees and
- a possible residual debt insurance
should be respected. If you find a cheap loan with a credit comparison, you can get a significantly reduced credit rate with an extended term.
What does debt restructuring cost and what should you watch out for?
As mentioned at the beginning, rescheduling only makes sense if it results in savings compared to the old loans. This definitely means that there are a few things to consider.
So it should be determined in advance whether a prepayment penalty is due when old loans are repaid.
Due to the early repayment of a loan, the banks suffer an interest loss, which they compensate with a prepayment penalty. The borrower should look at the loan agreement to see if such compensation needs to be paid. Typically, 1% of the credit balance has to be paid. But there will be other costs, for example
- Processing fees and
- registration costs
A debt rescheduling can amount to around 3% of the loan amount.
These costs can make a debt rescheduling loan so expensive that debt rescheduling no longer makes sense. That is why experts advise that borrowers should make a loan comparison. A loan comparison can then be used to easily compare different loan offers.
Borrowers should pay particular attention to the effective annual interest rate, special repayments and installment breaks.
Pay attention to notice periods for the loans
If a loan is taken out, borrowers conclude a contract with the lender. Not only the loan amount is determined, but also the interest rate and term. You can always cancel a loan contract. However, the notice periods should be observed. To recognize these deadlines, borrowers should also take a look at the loan agreement here. Notice periods are usually three months. However, once a loan has been taken out, it cannot be redeemed early. Then borrowers should question whether debt restructuring makes sense. The legislator sets a period of six months here.
What should you watch out for when rescheduling a loan?
When considering debt restructuring, borrowers should first get an overview of their finances. An expenditure / income check will immediately show how high the monthly financial burden may be so that it fits into the monthly budget. Once the amount has been determined, borrowers can use a loan comparison to find a cheap lender. However, a credit request should not be made directly, but rather a condition request first. If for any reason the loan is rejected, this rejection does not appear in the borrower’s credit record. By the way, borrowers should only cancel the loan when a new lender is found.
Can debt restructuring be rejected?
The borrower should assume that debt restructuring is not always successful. A rejection of a debt rescheduling does not seem understandable to the borrower. Borrowers should then consider that the debt restructuring will be accompanied by a new credit check. Nevertheless, borrowers should insist on knowing the reason. For example, insufficient income can cause the loan to be refused. The income should ideally be above the garnishment exemption limit. However, debt restructuring can also be refused in the case of a temporary employment contract. To be sure, borrowers should request a free self-assessment from credit record once a year.
How can creditworthiness be improved to repay your loans?
If you have a poor credit rating, you can improve it with so-called collateral loan. This can be a solvent guarantor or a second loan applicant. Such a person can come from family or friends. A real estate or condominium can also be viewed as collateral. If you have a loanable life insurance with a corresponding surrender value, you can also offer this insurance as security.