Balance compensation: How you can save up to 70 percent on interest costs with an installment loan
14 Jun 2025
7
Minutes
Katrin Straub
CEO at nextsure
Is your current account in the red and the interest rates eating away at your budget? An overdraft facility, with an average interest rate of twelve percent, is an expensive burden, but there is a quick and cheaper solution.
The topic in brief and concise terms
The interest rates for an overdraft are often three times higher than for an installment loan, averaging over twelve percent.
Restructuring a overdraft into an instalment loan can reduce interest costs by up to 70 percent and improve creditworthiness.
The application for a debt consolidation loan can be completed online in just a few steps, with disbursement often within 48 hours.
The Cost Trap: Why the Overdraft is So Expensive
An overdraft offers quick liquidity but costs above-average amounts of money. Banks demand, on average, over twelve percent interest for account overdrafts, some even up to 17 percent. If you constantly use 3,000 euros, you pay 360 euros or more in interest annually. In comparison, a personal loan with four percent interest costs only 120 euros per year. A low-interest personal loan can therefore reduce your interest costs by over 65 percent. Banks are legally obliged to point out cheaper alternatives if you use your overdraft for more than 75 percent on average over six months. The high interest rates clearly show why quick refinancing is often the most economically sensible step.
Preparation is everything: Requirements for the refinancing loan
To apply for a loan to balance the overdraft quickly, you must meet some basic conditions. These are similar to those of a regular loan application and protect the bank against default. A clean credit check by Schufa is crucial in this regard. A Schufa score of over 95 percent is considered a good value and increases your chances of securing top conditions. Additionally, an accurate household calculation is essential to demonstrate your financial capability.
The following documents and requirements are typically needed:
Being of legal age and having a permanent residence in Germany
A current account with a German bank
Regular income receipts (e.g. salary)
The last two to three payslips
Bank statements for the past three months
A valid ID or passport copy
A meticulous preparation of the household calculation shows the bank that you can easily manage the monthly installment. This significantly speeds up the approval process.
In four steps to an affordable loan: The digital application process
Applying for a loan to balance an overdraft is now usually a completely digital process, often completed in less than 30 minutes. The payout often occurs within 24 to 48 hours after approval. A digital quick loan is therefore ideal for quickly stopping high overdraft interest charges. The digital application process reduces the waiting time from days to just a few hours.
The process can be divided into four simple steps:
Loan comparison and application: Compare the terms online and fill out the application with the desired amount and duration.
Upload documents: Upload the required documents such as salary statements and bank statements digitally.
Verify identity: Conveniently verify your identity from home via the video identification procedure.
Digitally sign: Legally sign the loan agreement with a qualified electronic signature (QES).
After these steps, the bank will review your application and, upon a positive decision, initiate the payment.
Creditworthiness as Key: How Restructuring Your Debt Affects Your Schufa Score
A frequently used overdraft can be perceived by banks as a sign of financial instability, even if it does not directly result in a negative Schufa entry. However, replacing the expensive overdraft with a structured instalment loan is viewed positively. This demonstrates a responsible approach to managing your finances, which can improve your Schufa score in the medium term. A single instalment loan is more favourable for your credit rating than a permanently exhausted credit line. Our expert tip: Always use a "condition request" when comparing offers, as this is Schufa-neutral. A "credit inquiry," on the other hand, is noted by Schufa. When you consolidate multiple loans, it further improves the clarity of your finances.
Expert Tip: The revolving credit as a flexible and cheaper alternative
A fixed-rate loan is not always the best solution for replacing an overdraft. An interesting alternative is the credit line. This functions similarly to an overdraft but offers significantly better terms, with interest rates often between five and eight percent. You receive a fixed credit commitment up to a certain amount, such as 5,000 euros. You only pay interest on the amount you actually use. Repayment is flexible and not tied to fixed monthly installments. A credit line as an alternative is particularly suitable for individuals who need short-term liquidity repeatedly but wish to avoid high overdraft interest rates. This way, you combine the flexibility of an overdraft with the lower costs of a fixed-term loan.
Plan long-term: Choose the right term for lower rates
The choice of loan term has a direct impact on your monthly payments. A longer term results in lower instalments, which immediately reduces financial pressure. A loan of 5,000 euros costs about 150 euros per month for a three-year term. With a seven-year term, the instalment drops to approximately 70 euros. However, bear in mind that a longer term increases the total cost of the loan. Therefore, carefully check which monthly instalment you can afford without overloading your budget. Many banks offer free special repayments, allowing you to repay a loan with a long term more quickly if unexpected funds become available. This way, you remain flexible and can actively reduce interest costs.
Conclusion: Act now and escape the interest trap
The continuous use of an overdraft is one of the most expensive forms of financing. With interest rates of twelve percent and more, it quickly becomes a debt trap. A targeted loan to balance the overdraft is an effective solution. By refinancing with an instalment loan often at interest rates below six percent, you can drastically reduce your costs and regain full control through fixed instalments. The digital application process allows for quick and easy processing within a few days. Take the opportunity to reorganise your finances and reduce your monthly burden. A refinancing of overdraft and credit card can be the first step towards a debt-free future. Request an individual risk analysis now: Have your insurance situation checked for free and receive concrete optimisation suggestions.
More useful links
Wikipedia provides a comprehensive overview of the overdraft facility, its functionality, and characteristics.
Statista provides statistics on the interest rate comparison between installment loans and overdraft facilities, based on data from Check24.
Tagesschau informs about installment loan interest rates and their dependence on creditworthiness.
ZEW (Centre for European Economic Research) published a study on the topic of overdraft and installment loan interest rates.
Deutsche Bundesbank provides statistics on deposit and credit interest rates.
Consumer Advice Centre offers a report on consumer loans, credit experiences, and credit attitudes.
Deutsche Bundesbank provides statistics on consumer loans to private households (installment loans).
Statista provides data on loans to private individuals in Germany.
FAZ reports that consumers have to pay less for overdrafts.
Deutsche Bundesbank offers an Excel file with detailed data on installment loans.
FAQ
What requirements must I meet for a debt restructuring loan?
You must be of legal age, have a residence in Germany, possess a regular income, and be able to demonstrate sufficient creditworthiness (Schufa report).
What is the average interest rate for an overdraft?
According to Stiftung Warentest, the average overdraft interest rates in May 2024 were over twelve percent per year. Some banks even charge significantly more.
Can I use the debt consolidation loan for other purposes?
Yes, when applying, you can choose a higher loan amount not only to balance the overdraft but also to settle other liabilities or make purchases.
What happens if I exceed my overdraft?
If you exceed the agreed overdraft limit, even higher overdraft interest will be charged. Additionally, if the overdraft is extended beyond a certain period, the bank can cancel the overdraft facility and report this to the Schufa.
Is there a flexible alternative to an installment loan?
Yes, a personal line of credit is a flexible alternative. It works similarly to an overdraft facility but has significantly lower interest rates and offers flexible repayment without fixed installments.
How long does it take to receive the payout for a debt consolidation loan?
With a fully digital application process including video identification and digital signature, the loan amount is often disbursed within 24 to 48 hours.
