The new year is a good time to examine your finances. Who for example has a loan should be able to save – through debt restructuring. We show how much it is worth it.
If you still have to pay off a loan, it is worth taking a look at the conditions. Because you almost always pay more interest than necessary for ongoing installment loans. The solution: reschedule.
You then take out a new loan on better terms to replace one or more old ones. According to an evaluation by the comparison portal Verivox, you can save up to 1,500 euros on average.
Debt rescheduling is worthwhile despite the penalty payment
The greatest savings are therefore made by consumers who have agreed free special repayments of any amount in their loan agreement. In this case, your old bank cannot demand a so-called prepayment penalty. This means a special fee that you have to pay if you repay your loan before the end of the agreed term – for example by taking out a new, cheaper loan.
According to the law, this compensation may not exceed one percent of the remaining debt for loans taken out from June 2010 onwards. If the loan runs for less than a year, it drops to 0.5 percent. But even if you have to pay such compensation, you can still save something: According to Verivox, the average is 1,278 euros.
Who is allowed to restructure?
As a rule, debtors can always replace an installment loan with a cheaper new loan. This is worthwhile if the previous loan is significantly higher than the current interest rate level. Real estate loans are an exception: You can only reschedule them if the so-called fixed interest rate has just expired, i.e. the period for which the interest rate was fixed.
That’s how the calculation went
For the model calculation, the comparison portal evaluated more than 20,000 debt restructuring loans that customers applied for and concluded via the portal. The average consumer debt was 21,000 euros. At the time of the debt restructuring, the loans had an average term of around two years, and the average remaining term was around five years.
According to statistics from the Deutsche Bundesbank, the average interest rate for installment loans two years ago was 5.81 percent. Borrowers would therefore have to pay a total of 3,161 euros in interest in order to fully repay 21,000 euros over five years.
With the cheapest banks in the Verivox credit comparison, the majority of consumers pay only 3.07 percent interest for a debt restructuring loan today. With debt restructuring under these conditions, consumers would save a total of 1,278 euros if they still had to compensate their old bank with one percent of the remaining debt. Otherwise the savings would be 1,505 euros.
Three scenarios in comparison
How these numbers come about becomes clear when comparing three scenarios that Verivox has assumed. In the first scenario, there is no debt restructuring, the debtor simply continues to pay his higher interest rates. The second scenario assumes debt restructuring with compensation, the third one without compensation.
| Old credit continues | Debt restructuring with compensation | Debt restructuring without compensation | |
|---|---|---|---|
| Outstanding debt | 21.000 Euro | 21,210 euros (incl. 210 euros compensation) | 21.000 Euro |
| remaining term | 5 years | 5 years | 5 years |
| Interest rate (eff. pa) | 5.81 percent | 3.07 percent | 3.07 percent |
| interest costs | 3.161 Euro | 1.673 Euro | 1.656 Euro |
| Total Cost (Loan Amount + Interest) | 24.161 Euro | 22.883 Euro | 22.656 Euro |
| savings | none | 1.278 Euro | 1.505 Euro |
In the case of debt restructuring loans, state the intended use
“It is important that consumers indicate when they apply for a loan that they want to use the loan for debt restructuring,” advises Verivox Managing Director Oliver Maier. Because then, with the loan offer, they also received a power of attorney to sign, with which the new bank can cancel and repay the old loan – and they would no longer have to worry about anything themselves.
But it is not only convenient to tell the new bank what you need the loan for. It also brings you more favorable conditions. This is how the bank knows that you are not taking out the new loan, but are using it to repay existing debts. This improves your credit rating.
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