If you want to take out a loan for the debt restructuring, you have several options. It could not only replace an installment or overdraft facility, but also combine several loans into a single loan. Before starting debt restructuring, there are a few important things to consider. What matters most is the amount of the debit interest and the prepayment penalty, which may have to be paid to the old lender. Debt restructuring is only worthwhile if the interest savings from the new loan are higher than the prepayment penalty. Otherwise it might be better to continue to pay off the previous loan and, if necessary, to make use of the right to make additional special repayments. Of course, this presupposes that the bank or the private lender agrees to a special repayment.
Many employees, civil servants or pensioners have a overdraft facility in their checking account. If they meet the requirements, the self-employed and freelancers can also receive an overdraft facility on their business account. However, it is called current account credit. The amount of the overdraft facility or current account credit depends on the amount of the monthly income. If they fluctuate, the average amount is used to calculate the personal overdraft limit. If the account holder has negative Credit Bureau entries, the bank cannot grant him overdraft facilities in most cases. An exception would only exist if the existing Credit Bureau entries are only marginal and the cause for this can be quickly eliminated.
The overdraft facility has a number of advantages. It can be used at any time through cash payments or use of ATMs and can be paid back to the bank just as flexibly. The account holder does not have to commit to paying a certain minimum amount each month. Nevertheless, it can make sense to redeem an overdraft facility and take out a loan for the debt rescheduling in this connection. In certain circumstances, this approach is even recommended by the house bank. This could especially be the case if the overdraft facility is constantly pushed to the limit and there is no realistic possibility of repaying it in the short, medium or long term.
A loan for debt restructuring is an installment loan with a fixed term and a uniform monthly rate. In this way, the account balance is gradually brought back to zero or positive. However, the customer often has to reckon with the fact that the overdraft facility is no longer available until the debt has been repaid in full for the debt rescheduling.
Debt installment loan
The interest on an installment loan fluctuates considerably in some cases. For this reason, it is worthwhile to carry out a comparison not only before a planned borrowing, but also at a later date. Ideally, a credit calculator on the Internet should be used for this. Otherwise, the customer can hardly understand how high the current interest rates are and whether an installment loan is a cheap offer.
Anyone who concludes that their old installment loan is too expensive should seriously consider rescheduling. This approach is particularly worthwhile in times of low interest rates. Once a suitable loan has been found that is optimally tailored to personal needs, the application process can be carried out very quickly.
Similar to any other loan, the creditworthiness is also checked here. If it is a German lender, he will obtain Credit Bureau information and check the customer’s income. With a foreign loan, it is sufficient if the income is paid regularly and is sufficiently high. In this case, Credit Bureau information is not required. As soon as the loan application is approved, the money is paid out very quickly. The loan can now be used for the intended purpose, which in the specific case means that the old loan will be replaced and the monthly repayment installments will have to be paid to the new lender in the future. In this context, it may be worthwhile to increase the total loan amount in order to gain additional financial scope. If the monthly installments are to be reduced, the first thing to consider is savings in interest rates. Under certain circumstances, however, it would also be possible to extend the term.
Combine multiple loans
Anyone who has an overdraft facility and / or a credit card and has also taken out an installment loan can easily lose track of their financial obligations. In this situation, it would not only be highly recommended to reschedule one or more loans, but also to think about a summary of all liabilities.
The most important prerequisite for being able to take out a loan for debt restructuring is general creditworthiness. If all existing loans are serviced regularly and the monthly installments are paid regularly, there should be no major problems. It only becomes difficult if the borrower has failed to meet its obligations in the past and the Credit Bureau information shows serious negative entries such as canceled loans, an affidavit or ongoing personal bankruptcy.
Here, the defaulting debtor often has no other option than to look for suitable alternatives. If he has completely lost track of his financial obligations and the expenditure regularly exceeds the income, then there is overindebtedness. In this case, it would be imperative to negotiate with the private or public law creditors and to look for a solution together. A visit to a state-recognized debt counseling center and the use of expert advice can be a valuable help here.