Debt

When debt restructuring can be worthwhile?

Debt was for a long time primarily a topic for entrepreneurs and self-employed people who needed a kick start from the bank for the foundation and successful implementation of their projects. A few centuries ago, it would have been an almost absurd idea that people would get a loan to finance luxury items or travel, or access funds in some other way that they didn’t have access to themselves. Well, of course there were loans from friends or acquaintances, but institutionalized lending was mostly in the form of a letter from the local haberdashery.

 

Debt rescheduling

Debt rescheduling

At the latest since the introduction of bank accounts and the associated overdraft facility, also known as bank overdraft facility, it has become remarkably easy to have the bank withdraw money that is not recorded in black and white on the books. A certain carelessness in dealing with expenses has also moved in: what is not clear and can be seen by everyone with efforts, such as an appointment with a bank advisor, is happy to “get out of your mind”. And of course this also means that private individuals get into debt faster than banks would like. Deleting bank overdrafts is out of the question, which is why a new form of debt reduction has been advertised for several years: the so-called debt restructuring.

What does it mean? When rescheduling, another lender, such as a bank, takes over the existing loan and replaces the original amount. Most people advertise here with lower interest rates or more flexible terms – who wouldn’t want to save money or cut the monthly rate? Especially when compared to credit cards, the interest burden is many times lower if you venture out to a customer advisor and have an individual offer made. And this is also what the banking industry wants: ordinary loans are clearly preferred to overdrafts.

 

Can a loan be canceled without any financial consequences?

Can a loan be canceled without any financial consequences?

Will a bank simply allow them to miss out on a lot of money here and is there no contractual security built into the loan agreement? In the end, it is normal for a current account credit to be repaid at any time, but this is another thing when you sign a regular credit agreement. The answer to this can be found in the laws on the subject: A possible penalty payment is possible, but capped at a maximum of 1% of the remaining loan amount – so if the bank insists on such a payment, it is quite possible that the debt rescheduling will still be worthwhile.

Caution should be exercised when rescheduling, namely in the form of avoiding traps. After all, the bank’s customer advisor is well paid and trained, and there are numerous tricks to keep you from moving:

  • It is often tried to sell the debtor a new, large loan, which of course then increases the interest burden even further. We definitely advise against such deals: Most of them are not advantageous.
  • Also, do not take out any residual debt insurance when concluding the new loan contract without getting need information about costs and risks: Most of these are not really beneficial for the customer, but they increase the costs again immensely.