Find out all about your debt restructuring options and alternatives
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What is debt restructuring?
With debt restructuring, you cancel one or more existing loans and take out a new loan instead. This allows you to benefit from financial advantages in many cases. The most common reasons for debt restructuring are
Loans with lower interest rates
The combination of several loans or liabilities into one
Changes to the credit terms
Improving creditworthiness - for example by reducing the monthly charge
Where can I get a debt rescheduling?
It depends on your situation and how quickly you need the money. You can find various providers below:
Banks: If you have a regular income and a good credit rating, the bank can certainly offer you the option of debt restructuring. It is best to enquire with your bank, but also with other banks, to get the best interest rates.
P2P lending platforms: Among other things, you can get a so-called private loan here. The platform puts you in touch with investors who, unlike banks, can often offer you more flexible debt restructuring options.
Pawnshops: If you urgently need to pay off debts and can't wait long for a debt restructuring loan, a pawn loan is suitable for you. In addition, no credit check is carried out there and you can get your loan without proof of income.
Family & acquaintances: The biggest challenge in this case is to find someone who has the necessary financial means to help you out with a debt restructuring. The advantage is that loans from friends or relatives are usually interest-free.
How does debt restructuring work?
As a rule, debt restructuring always works in the same way. Existing debts are replaced by a new loan. Ideally with lower interest rates, an adjusted term or lower loan installments:
Get an overview of your debts and check whether you have to pay early repayment penalties when rescheduling your debt.
Get quotes and compare the interest rates, fees, terms and repayment flexibility. If you need a loan with a poor credit rating or no regular income, you could also consider a pawn loan.
If another bank offers more favorable conditions than your house bank, you could renegotiate again. Perhaps your bank will make concessions to avoid losing you as a customer.
Submit a loan application for debt restructuring. You usually have to disclose your financial situation for this - with the exception of pawn loans, where collateral is sufficient as security for a loan.
Once you have been approved, you will be paid out the money and can use it to pay off your existing debts.
The repayment of the new debt then begins. You repay the new loan as agreed in accordance with the agreed conditions.
Can I refinance any form of loan?
In principle, any loan can be restructured, but you should consider the repayment terms before you cancel a loan or repay it in full.
Installment loans
Installment loans, which in most cases were taken out as consumer loans, can usually be rescheduled without any problems. Ideally, you will benefit from lower monthly charges or more favorable interest rates.
✅Debt restructuring is usually uncomplicated.
Overdraft facilities
As the overdraft facility - also known as an overdraft facility - often has very high interest rates, you can often significantly reduce the costs by switching to an installment loan.
✅Debt restructuring is usually uncomplicated.
Credit card installments
Similar to the overdraft facility, the interest on credit card installments is often very high. You can reduce costs here by rescheduling to an overdraft or installment loan, but also by rescheduling to a pawn loan.
✅Debt restructuringisusually uncomplicated.
Construction financing
This form of financing is often tied to a specific interest period and tends to be concluded on a long-term basis. You may have to pay early repayment penalties when rescheduling your debt. Without a valid reason (such as the sale of the mortgaged property), high additional costs are possible when rescheduling.
❗Debt restructuring can be associated with additional costs.
Corporate loans
This depends heavily on the economic situation of your company. Ideally, better conditions can be achieved through debt restructuring.
❗Debt restructuring is heavily dependent on the economic situation of your company.
Pawn loans
Pawn loans or car loans are intended more for short-term bridging, but can be paid out on the same day. The fees are usually higher than for an installment loan, but often much lower than for a credit card installment payment.
✅Debt restructuring is usually uncomplicated.
What documents do I need for debt restructuring?
Which documents you need depends on the form in which and the provider with whom you would like to reschedule your existing debts. Below you will find an overview of the documents you will need in most cases:
PROVIDER | DOCUMENTS |
|---|---|
House bank |
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Third-party bank |
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Pawnshop |
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P2P platforms |
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What happens to insurance policies for the loans that are to be rescheduled?
Some insurance policies can be transferred from the existing loan to the new loan. However, you may also have to cancel insurance policies and take out new ones elsewhere. It is best to read your insurance policy carefully. You will find all the necessary information in the contract agreements.
If you are not sure, you can also contact your insurance company directly for advice on the best course of action.
If it is not possible to transfer your insurance, get a quote for new insurance before rescheduling your existing debts. This is the only way you can be sure that debt restructuring really is a financial advantage for you.
How long does it take to restructure existing loans or liabilities?
That depends entirely on the provider. If the debt restructuring is a lengthy process for which you need a lot of different documents, it could take longer to complete. In general, it takes a lot of time to compare offers, submit applications or wait for approvals before you actually receive your payout. However, if you opt for a pawn loan, you will usually receive your money on the same day if you wish.
Is debt restructuring possible for everyone?
In principle, debt restructuring is possible for most borrowers. However, not every borrower is suitable for debt restructuring. The following factors can influence your options:
Credit rating: A good credit rating often plays a major role in whether debt restructuring makes sense. If you have a medium or poor credit rating, you will not be able to get a loan from many lenders or will have to accept higher interest rates. You can usually get a loan without a credit check almost exclusively from pawnshops or from friends and family.
Income: If you have a regular income from employment, you generally have a better chance of being approved for a loan with almost every provider. If your income is not from employment, there are often a few hurdles before you get a positive decision. Here too, you are usually most likely to get a loan approval from friends and family or at a pawnshop.
Existing debts or financial obligations: If your financial obligations and/or existing debts exceed your income, this will reduce your chances of being approved. As a rule, your household finances must be such that a possible loan installment can be repaid without any problems. In a pawnshop, you are only liable for collateral, so this point is also irrelevant for a pawn loan.
Collateral: Existing collateral such as property ownership or insurance can increase your chances of getting a loan. For a pawn loan, collateral is the only requirement for a loan to be granted. In all cases, you may lose your property if you do not repay the loan.
What does it cost to restructure a loan?
Even if you can reduce the interest rate by rescheduling your debt, you should bear in mind that some additional costs may be incurred:
In any case, processing fees must be paid to the provider carrying out the debt rescheduling.
With mortgage loans, there is a high probability that you will have to pay a prepayment penalty if you terminate the loan early.
If your mortgage is linked to a land charge or mortgage, notary fees may also be incurred for changes to the land register.
Fees may also be incurred for the entry in the land register itself.
When does debt restructuring make sense?
This depends entirely on your individual needs. Below you will find possible examples of how debt restructuring could be worthwhile for you:
Lower interest rates are available.
You can improve your credit rating with more favorable credit conditions.
You can combine several loans into one and thus simplify administration.
You can reduce the monthly charge by paying a lower rate.
You can minimize your risks by converting a variable interest rate into a fixed interest rate.
What are the advantages and disadvantages of debt restructuring?
It always depends on your personal situation whether debt restructuring makes sense or not. Here we compare the advantages and disadvantages for you so that you can find out whether debt restructuring could be an option for you
POSSIBLE ADVANTAGES | POSSIBLE DISADVANTAGES |
|---|---|
Lower interest rates | Early repayment penalties |
Lower monthly payments | Additional processing costs |
Summary of debts | Risk of overfinancing |
Improvement of payment terms | Renewed credit check |
Better overview of finances | Longer running time |
What alternatives are there to debt restructuring?
If debt restructuring is not an option for you, you could choose other ways to improve your financial situation:
Negotiate with your current lender(s). You may be able to adjust the conditions or have the repayment terms changed.
Ask about a payment suspension. Many providers give you the option of pausing the repayment of your debts. This gives you time to exhaust all options to improve your situation.
If you have additional capital, you may also be able to make an unscheduled repayment. This allows you to reduce the total debt and lower the interest costs or the term.
If you're not sure whether debt restructuring is the right solution for your situation, get professional support. Debt counseling can help you get a grip on your financial situation.
Revise your household budget and optimize your spending. This will allow you to create financial leeway and possibly repay loans more quickly without having to refinance them.
Frequently asked questions and answers
What is debt restructuring?
With debt restructuring, you replace existing loans with a new loan - ideally with more favorable conditions.
How often can I refinance a loan?
There is no legal upper limit. If the financial situation is right, nothing stands in the way of repeated debt rescheduling.
What happens to insurance policies for loans that I want to refinance?
In some cases, you can transfer insurance policies. If this is not possible, they must be terminated and taken out again.
Is it worth rescheduling a loan?
It can be worthwhile if you can replace existing debts with a loan with better conditions.
When does it make sense to use a pawn loan for debt restructuring?
A pawn loan is particularly useful if you need the money for a debt restructuring very quickly, as it can be paid out immediately. Pawn loans are also suitable for people with a negative credit rating or without a regular income.