Rescheduling a loan: when a debt restructuring makes sense

Do you need to repay one or more loans, you will most likely save a lot of money if you reschedule your loans. Since interest rates are still at a low level, you will get better terms on a debt restructuring than on your existing loans. Find out when it makes sense for you to reschedule your existing loan, the benefits of rescheduling and more tips on rescheduling in this post.

Reschedule credit: what does it mean?

When you reschedule a loan, you combine one or more existing loans and replace them with a new loan. This is worthwhile, for example, if you can take out the new loan with more favorable interest rates. There are no longer several installments from your account at different times, but only a single loan installment. This reduces your monthly burden, gives you a better overview of your finances and gives you back financial leeway.

In which cases it makes sense if you reschedule a loan?

Debt rescheduling - enjoying freedom, rear view of a woman in a hat and white dress standing with outstretched arms in a field against a blue sky

How much money you save on a debt restructuring depends on the remaining debt, d. H. How much money you still have to pay to your lender. The remaining term and the current interest rate also play an important role.

The larger the residual debt and the remaining term, the more money you can save by rescheduling your loan. Debt restructuring makes sense if the interest rate and total cost of the new loan are lower than your existing loan. Their creditworthiness resp. Credit rating can improve as a result.

In these cases, it may be worthwhile to reschedule your existing loan:

  • You are currently paying off several loans and may have other outstanding payment obligations. Then you can combine several loan installments through a debt restructuring. The new loan installment is usually significantly lower than the previous installments together.
  • The current interest rate level is lower than that of your existing loans. With a debt rescheduling you can conclude a loan agreement at a more favorable interest rate.
  • Your income and credit rating has improved overall. If you reschedule your loans, you will get the new loan at better conditions.
  • You want to change the term for your loan or the amount of the loan installment. When you reschedule your debt, you can reset the rate of your new loan. For example, agree on a lower rate with a longer term if your income has dropped.
  • You regularly overdraw your checking account. Use your overdraft facility, this is convenient, but expensive. Because the interest rate for the overdraft facility is comparatively high. Debt rescheduling is the more favorable option.

What additional costs arise with a debt restructuring?

Your lender may demand compensation if you repay your existing loan early. This so-called early repayment penalty is clearly regulated for consumer loans:

  • If you are still paying 13 monthly installments or more, the remaining debt may be max. 1% of the remaining amount.
  • If you still have to pay 12 monthly installments or less, the compensation amounts to a maximum of 0.5.

In many cases, however, the bank does not charge any fees if you terminate your loan agreement prematurely.

In construction financing, there is no clear regulation on the early repayment penalty if you want to reschedule your loan within the fixed-interest period. However, you can terminate your loan agreement after 10 years at the latest with six months' notice. In this case, the bank may not charge you an early repayment penalty.

Which loans can you reschedule?

Installment loans and overdraft facilities can usually be rescheduled without any problems. A construction loan can also be rescheduled, but here you need to consider some points.

Rescheduling an installment loan

In principle, you can reschedule any consumer loan. The loan for your new furniture can be rescheduled in the same way as a car loan. The vehicle title, which the lender of the existing car loan keeps as collateral, is transferred to the new lender when you reschedule your debt.

Compare the APR of your existing loan with the interest rate of new loans. Always specify rescheduling as the purpose of use with the new lender. Also, include any additional costs that you may incur in the new loan.

The rescheduling of the overdraft facility of your current account is also worthwhile if you frequently overdraw your overdraft facility. The interest rates for the overdraft facility are comparatively high. The new loan is cheaper due to the better conditions and it helps you to repay your debts in manageable installments.

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Debt rescheduling with a construction loan

In principle, it is worthwhile if you reschedule your home construction loan. Here, too, you benefit from lower interest rates, lower monthly installments and other advantages.

However, it depends on the right timing. If the period for the fixed interest rate expires and you still have a residual debt outstanding on your construction financing, you will have to find follow-up financing.

If you want to redeem your construction financing early, you must expect a high prepayment penalty. In certain cases this can also be worthwhile.

If, on the other hand, you have already paid off your home construction loan for 10 years and the fixed interest rate goes beyond that, you can cancel your loan with a six-month notice period. You then pay no compensation to the lender.

Debt rescheduling with a subordinated loan

A special form in the construction financing is the subordinate financing or. The subordinated loan. Subordinated financing is another loan that you take out in addition to your home construction loan. For the first home construction loan, your lender has a land charge entered in the land register. Further land register entries for new loans that you take out are subordinated.

Subordinated financing is a good option if you are paying off a current construction loan for your home and have taken out other loans as well. This may be the case, for example, if additional costs are incurred when buying or building a house that you did not anticipate when planning your construction financing.

With subordinated financing, you can combine several loans, agree on longer terms if required and thereby significantly reduce your monthly loan installment. Your monthly expenses for your loan will be more manageable in the process and also more manageable for you. Subordinate financing is also particularly suitable if you want to clear up your negative schufa.