Debt rescheduling is always an alternative for borrowers if several installment loans run in parallel and you have either lost the overview or the total installments are too expensive. A debt rescheduling can also be appropriate if loan costs are to be saved because, for example, the level of interest rates on the market has changed and installment loans are being granted on better terms than was the case when borrowing at the time.
How to proceed with a planned debt restructuring
If you want to take care of the redemption and the associated formalities alone, you should ask the previous lenders for the redemption amount for the installment loan. In the addition, the transfer sums then result in the new loan to be applied for, which should be requested after a loan comparison from a bank that offers particularly favorable conditions.
There are also some banks that have a debt rescheduling loan in their portfolio and also offer their customers all of the transfer formalities for them. As a customer, you only have to issue a power of attorney and do not have to worry about anything else.
No money flows here when the loan is granted because the new loan is used directly to replace the existing loans. Ultimately, the borrower will then only have to pay an installment to the new lender in the future. If the duration of the new loan is chosen to be long enough, it may well be that the new rate represents a much lower burden than was previously the case. The question here is whether this is desired.
Debt rescheduling checklist
- Determine remaining debt
- carry out a loan comparison with a loan calculator using the remaining debt sum
- Apply for a new loan online and use it to pay the remaining loan amount
A debt rescheduling is particularly worthwhile if the interest on the current loan contract is higher than the interest on the new contract. If you cancel the loan early, the banks charge prepayment penalties. Inquire about the amount of the prepayment penalty and include this in the event of a debt rescheduling.
It is not always current installment loans that should or have to be rescheduled. It is often the expensive overdraft facility that is to be replaced with a debt rescheduling loan or the revolving credit of a credit card.
If it is no longer possible to balance the overdraft facility or credit card balance in the normal way, rescheduling is often the inexpensive alternative. With the installment loan, there is the advantage that a fixed monthly installment has to be paid, which automatically leads to the loan being paid off at the end of the term. The debt rescheduling only makes sense if it is subsequently strictly ensured that the overdraft facility and / or the credit card framework is not overused.
Debt restructuring issues
If borrowers are creditworthy and current loans are to be rescheduled only because of the high costs or the better clarity, everything is easy. It becomes problematic if there are already payment problems with current credit obligations and this results in negative entries in the credit bureau.
Banks are usually unwilling to issue new loans if the creditworthiness of borrowers is already limited. Sometimes there is a possibility that approval can still be granted by providing additional collateral, for example a solvent guarantor.
If that doesn’t work and you’re over-indebted, you should contact a debt counseling service and look for solutions with professional help.
Many consumers, who are hopelessly over-indebted, can get professional help to reduce their debts without having to reschedule their existing loans. Debt advisers also contact their creditors to find possible solutions, for example by deferring installments or seeking a settlement. The last means of overindebtedness is private bankruptcy.