Overdraft settlement: How to save up to 70 percent on interest costs with a personal loan
14/06/2025
10
Minutes
Katrin Straub
Managing Director at nextsure
Is your current account overdrawn and the interest eating into your budget? An overdraft facility, with average interest rates of twelve per cent, is an expensive burden, but there is a quick and more affordable solution.
The topic in brief and concise terms
The interest rates for an overdraft facility are often three times as high as for a personal loan, at an average of over twelve per cent.
Refinancing an overdraft facility into an instalment loan can reduce interest costs by up to 70 per cent and improve creditworthiness.
You can apply for a debt consolidation loan online in just a few steps, with funds often paid out within 48 hours.
The cost trap: Why overdrafts are so expensive
An overdraft does offer quick liquidity, but it costs a lot of money. On average, banks charge more than twelve per cent interest for an overdraft, and some charge up to 17 per cent. If you use €3,000 permanently, you will pay €360 or more in interest each year. In comparison, a personal loan with four per cent interest costs only €120 per year. A low-cost personal loan can therefore reduce your interest costs by more than 65 per cent. Banks are legally obliged to point out cheaper alternatives if you use your overdraft over a period of six months at an average of more than 75 per cent. The high interest rates make it clear why a quick refinancing is often the most economically sensible step.
Preparation is everything: Requirements for a debt consolidation loan
To apply quickly for a loan to cover your overdraft, you must meet a few basic requirements. These are similar to those for a normal loan application and protect the bank against default. A clean credit check by Schufa is crucial. A Schufa score of over 95 per cent is considered a good value and increases your chances of top terms. In addition, a correct household budget calculation is essential to prove your financial capacity.
The following documents and requirements are typically necessary:
Being of legal age and having a permanent residence in Germany
A current account with a German bank
Regular incoming income (e.g. salary)
The last two to three payslips
Bank statements for the last three months
A valid copy of an ID card or passport
Careful preparation of the household budget calculation shows the bank that you can easily manage the monthly instalment. This significantly speeds up the approval process.
In four steps to an affordable loan: The digital application process
Applying for a loan to cover an overdraft is now usually a fully digital process, often completed in less than 30 minutes. Payment is often made within 24 to 48 hours after approval. A digital fast loan is therefore ideal for quickly stopping high overdraft interest. 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 terms online and complete the application with the desired amount and term.
Upload documents: Upload the required documents such as payslips and bank statements digitally.
Confirm identity: Verify your identity conveniently from home using the video identification process.
Sign digitally: Sign the loan agreement in a legally secure manner with a qualified electronic signature (QES).
After these steps, the bank reviews your application and, if the decision is positive, arranges payment.
Creditworthiness as the key: How debt restructuring affects your SCHUFA score
An overdraft facility that is used frequently can be viewed by banks as a sign of financial instability, even if it does not directly lead to a negative Schufa entry. The replacement of an expensive overdraft with a structured instalment loan is, by contrast, viewed positively. This shows that you handle your finances responsibly, which can improve your Schufa score in the medium term. A single instalment loan is more favourable for your credit rating than a credit line that is permanently maxed out. Our expert tip: when comparing offers, always use a “soft enquiry”, as this is Schufa-neutral. A “credit enquiry”, on the other hand, is recorded by Schufa. If you consolidate several loans, this also makes your finances clearer.
Expert tip: the line of credit as a flexible and more affordable alternative
A fixed personal loan is not always the best solution for paying off an overdraft. An interesting alternative is a credit line. This works similarly to an overdraft, but offers significantly better terms, with interest rates often between five and eight per cent. You receive a fixed credit approval up to a certain limit, for example €5,000. You only pay interest on the amount you actually draw down. Repayment is flexible and not tied to fixed monthly instalments. A credit line as an alternative is particularly suitable for people who repeatedly need short-term liquidity but want to avoid high overdraft interest. This combines the flexibility of an overdraft with the lower costs of a personal loan.
Plan long term: choosing the right term for low instalments
The choice of loan term has a direct impact on your monthly repayments. A longer term results in lower instalments, which immediately eases the financial burden. A loan of 5,000 euros costs around 150 euros per month over a three-year term. With a term of seven years, the instalment falls to around 70 euros. However, bear in mind that a longer term increases the total cost of the loan. You should therefore carefully assess which monthly instalment you can afford without overburdening your budget. Many banks offer free unscheduled repayments, allowing you to repay a long-term loan more quickly if unexpected funds become available. This keeps you flexible and allows you to actively reduce interest costs.
Continued use of an overdraft facility is one of the most expensive forms of financing. With interest rates of twelve per cent and above, it quickly becomes a debt trap. A targeted loan to clear the overdraft is an effective solution. By refinancing into an instalment loan with interest rates often below six per cent, you can drastically reduce your costs and regain full control through fixed repayments. The digital application process enables fast and straightforward processing within just a few days. Take the opportunity to reorganise your finances and reduce your monthly burden. Refinancing overdrafts and credit cards can be the first step towards a debt-free future. Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive overview of overdrafts, how they work and their features.
Statista provides statistics comparing interest rates between instalment loans and overdrafts, based on data from Check24.
Tagesschau provides information on instalment loan interest rates and their dependence on creditworthiness.
ZEW (Centre for European Economic Research) published a study on overdraft interest rates and instalment loans.
Deutsche Bundesbank provides statistics on deposit and lending interest rates.
Verbraucherzentrale offers a research report on consumer loans, credit experience and credit attitudes.
Deutsche Bundesbank provides statistics on consumer loans to private households (instalment 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 instalment loans.
FAQ
What requirements do I need to meet for a debt consolidation loan?
You must be of legal age, have a residence in Germany, have a regular income and be able to provide evidence of 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 above twelve per cent per year. Some banks even charge significantly more.
Can I also use the debt consolidation loan for other purposes?
Yes, when applying, you can choose a higher loan amount to not only cover the overdraft, but also pay off other liabilities or make purchases.
What happens if I go over my overdraft limit?
If you exceed the agreed overdraft limit, even higher overdraft interest charges will apply. In addition, if the overdraft is persistently exceeded, the bank may terminate the overdraft facility and report this to Schufa.
Is there a flexible alternative to an instalment loan?
Yes, a credit line is a flexible alternative. It works similarly to an overdraft, but has significantly lower interest rates and offers flexible repayment without fixed instalments.
How long does it take for a debt consolidation loan to be paid out?
With a fully digital application process with video identification and digital signature, the loan amount is often paid out within 24 to 48 hours.
