Consolidating multiple loans: How to reduce your monthly burden by up to 30 percent
16 Jun 2025
12
Minutes
Katrin Straub
CEO at nextsure
Numerous loans with high interest rates burden your monthly budget and financial flexibility. A debt restructuring consolidates your liabilities into a single, more affordable payment and can significantly reduce your costs. This article shows you in four steps how to regain control.
The topic in brief and concise terms
By consolidating several loans, you can often reduce your monthly payment by 20 to 30 percent.
A debt restructuring improves your SCHUFA score because instead of having many small liabilities, you only have one clear one.
The costs for early loan repayment (prepayment penalty) are legally limited to a maximum of one percent of the remaining debt.
The problem: Many loans, high rates, and a lost overview
A personal loan for the car costs 250 euros, kitchen financing costs 150 euros, and the overdraft facility is 1,000 euros in the red. Such scenarios quickly lead to a monthly total burden of over 400 euros, often with very different interest rates. The overdraft facility alone can cause interest of over nine percent.
This fragmentation of debt not only makes household planning considerably more difficult. Credit agencies like SCHUFA often rate multiple parallel running small loans more negatively than a single larger loan. Each individual loan agreement represents its own financial obligation, which increases the risk of default from the creditors' perspective. Such a structure can lower your credit score by several points.
The consequence is a financial downward spiral where an increasing portion of income is spent solely on interest. However, there is a clear way to break through this structure and regain control. The solution lies in replacing expensive old loans with a single, cheaper financing option.
The solution: Consolidate multiple loans into one
A debt rescheduling consolidates all existing liabilities into a single new loan with better terms. Instead of paying three or four instalments to different creditors, you only have one instalment to a bank. This immediately simplifies your finances. However, the key advantage lies in the interest savings, which can often amount to several thousand euros over the duration.
An example calculation illustrates the potential:
Existing Loan 1: 5,000 euros outstanding debt at eight percent interest
Existing Loan 2: 3,000 euros outstanding debt at ten percent interest
Overdraft: 2,000 euros balance at twelve percent interest
By rescheduling this total debt of 10,000 euros to a new interest rate of, for example, five percent, the interest burden is significantly reduced. The interest rate difference alone can reduce your monthly payments by 20 to 30 percent. You can find information on how to reschedule an existing instalment loan in our detailed guide. The funds that are freed up can be used for repayment or other important expenses.
The prerequisites: When refinancing is sensible and possible
A debt restructuring is particularly worthwhile if the interest rates for new instalment loans are significantly lower than those of your old contracts. Currently, the average interest rates for instalment loans are around 6.67 per cent, which means a significant saving for many. However, a debt restructuring is subject to certain conditions that banks check.
You typically need to meet the following criteria:
Age of majority and residence: You must be at least 18 years old and have a permanent residence in Germany.
Regular income: An open-ended employment contract with a stable net income is the most important requirement.
Good creditworthiness: Your SCHUFA report should not show any negative entries such as payment defaults.
Our expert tip: Even an expensive overdraft can be easily converted into a cheaper instalment loan. As overdraft interest rates are often twice as high as instalment loan rates, the saving potential is particularly large here. Learn more about how to replace an expensive overdraft. This measure alone can noticeably improve your financial health.
The Cost Check: The Early Repayment Fee as a Crucial Factor
If you repay a loan early, the bank misses out on planned interest income. As compensation, it can charge a so-called early repayment fee. This fee is the main cost factor in a refinancing. The good news: The legislator has set clear limits for consumer loans.
Our expert tip: The legal basis is Section 502 of the German Civil Code (BGB). According to this, the compensation may be a maximum of one percent of the prematurely repaid amount. If the remaining term of your loan is less than twelve months, the upper limit even decreases to 0.5 percent. Therefore, refinancing only makes sense if the interest savings from the new loan significantly exceed this one-off fee.
Therefore, examine your old loan agreements carefully. If the details for calculating the early repayment fee are missing or incorrect, the bank's claim may even lapse entirely. How to calculate the early repayment fee online is shown in another article. This ensures that the switch is worthwhile for you.
The Credit Boost: How debt restructuring improves your SCHUFA score
Consolidating multiple loans has a positive side effect that many are unaware of: It can improve your credit rating. Credit agencies such as SCHUFA view a smaller number of credit obligations more favourably. A single installment loan, reliably serviced, indicates more financial stability than three or four small loans.
When the old loans are paid off, they are reported as 'settled' to SCHUFA. Only the new debt restructuring loan remains. This optimised financial status can boost your SCHUFA score by a few points, making it easier for you to secure future financing, such as for a property. A score of over 95 percent is already considered good.
However, caution is advised when requesting offers. Ensure that banks only send a 'condition inquiry' and not a binding 'credit inquiry' to SCHUFA. Multiple credit inquiries in a short period can temporarily lower your score. Even debt restructuring despite a negative SCHUFA is possible under certain circumstances with specialised providers.
The timetable for debt restructuring: Achieve financial relief in four steps
To successfully consolidate your loans and reduce your monthly burden, proceed systematically. The following four steps will guide you safely to your goal.
Step one – Assessment: List all existing loans with the outstanding balances, the current interest rates, and the monthly installments. Don't forget your overdraft credit. This is the only way to get the exact amount you need to refinance. A precise household calculation for the loan application is half the battle here.
Step two – Obtain offers: Use the determined total to request offers for a refinancing loan. Pay attention to the effective annual interest rate and ensure that only SCHUFA-neutral condition inquiries are made.
Step three – Cost-benefit analysis: Calculate the possible prepayment penalties for your old loans. Compare these one-time costs with the total interest savings from the new, cheaper loan. The savings should exceed the costs by at least several hundred euros.
Step four – Closing and settlement: After selecting the best offer, finalize the new loan agreement. Typically, the new bank transfers the loan amount directly to your old creditors to settle existing debts. From now on, you only pay the one new installment.
This structured process ensures that you end up in a better financial position than before.
Request a personalised risk analysis now
Restructuring debt is an effective tool for optimizing your finances, but it requires careful planning. If you're unsure which solution is best for your situation, we're here to assist you. Our mission as a digital insurance portal is to offer you tailored and easy-to-understand solutions.
Get your insurance situation and financial obligations reviewed for free and receive concrete optimization suggestions. Request your personalized risk analysis now.
More useful links
Wikipedia provides a comprehensive overview of the topic of debt restructuring, including general information and definitions.
The Deutsche Bundesbank provides current interest rate statistics on money and capital markets that are relevant for the assessment of restructuring loans.
The Bundesfinanzministerium provides information on financial market stability in Germany.
The KfW Bank provides information on funding programs and financing options for individuals.
The Caritas offers an online debt counselling service for people in financial difficulties.
FAQ
What are the main benefits of consolidating multiple loans?
The three main advantages are: Firstly, a lower monthly payment due to a more favourable overall interest rate. Secondly, a much clearer overview of your finances, as you only have one payment to make to a creditor. Thirdly, an improvement in your creditworthiness and your SCHUFA score.
What costs are involved in refinancing?
The only significant costs are usually the early repayment penalty for settling your old loans early. This is legally capped at a maximum of one percent of the outstanding balance. The new refinancing loan itself typically does not incur additional closing fees.
What documents do I need for a debt restructuring?
You will typically need the last three pay slips, seamless bank statements for the last three months, a copy of your ID card, as well as the existing credit agreements with the exact remaining debts by the redemption date.
Is debt restructuring possible even with a negative SCHUFA?
It is more difficult, but not impossible. Some specialised banks and credit brokers offer solutions for debt restructuring despite negative SCHUFA entries. Additional securities or a second borrower are often required here, and the interest rates are generally higher.
Is it worth refinancing even with small loan amounts?
Yes, even for smaller amounts it can be worthwhile, especially if you are repaying an expensive overdraft or credit card debt. The interest rate difference is often so significant that even with an outstanding debt of just a few thousand euros, you can achieve noticeable savings.
How do I find the best provider for debt restructuring?
The best way is an independent comparison of credit offers via an online portal. Make sure to make SCHUFA-neutral condition requests to avoid affecting your score. Compare the effective annual interest rate to transparently see the total costs.
