Refinance expensive credit at a direct bank: reduce interest costs by up to 30 percent
14 Jul 2025
9
Minutes
Katrin Straub
CEO at nextsure
An expensive installment loan from your direct bank significantly reduces your monthly budget? Often, refinancing can save several thousand euros in interest costs and regain financial flexibility. This article shows you step by step how to take advantage of current low interest rates.
The topic in brief and concise terms
A debt restructuring can reduce interest costs by thousands of euros, especially if the old loan has a high interest rate.
The early repayment penalty for installment loans is legally capped at a maximum of one percent of the remaining debt, making refinancing predictable.
Combining several loans into a single one not only improves clarity but often also increases the individual's credit score with SCHUFA.
Potential Analysis: When Refinancing a Direct Bank Loan Makes Sense
A debt restructuring makes sense when the interest savings exceed the costs incurred. Even a lower interest rate by 0.2 percentage points can make restructuring profitable. Check your existing loan agreement: If the effective annual interest rate is significantly above the current market conditions of, for instance, four percent, there is considerable savings potential. With an outstanding debt of 15,000 euros and an interest difference of three percentage points, you can save over 450 euros per year.
The decision depends on three factors: the remaining outstanding debt, the remaining term, and the amount of the early repayment penalty. If the remaining term is less than twelve months, refinancing is often no longer worthwhile. Many borrowers underestimate how significantly even a small reduction in interest can reduce total costs over several years. A thorough analysis of your contract documents is the first step in making an informed decision for or against restructuring your loan. Reviewing the current conditions is crucial to realise the full savings potential.
The 4-step plan for successful refinancing
A structured process is key to successfully refinancing an expensive loan. By following these four steps, you can systematically achieve better terms:
Determine outstanding balance and contract details: Request an exact statement of the remaining balance as of your desired settlement date from your current bank. This document should also include the notice period and the amount of any potential early repayment fee.
Request new loan offers: Use online comparison calculators to make non-binding enquiries about terms. Indicate "refinancing" as the purpose to receive suitable offers from over 20 banks.
Compare total costs: Add the early repayment fee to the total costs of the new loan. Switching only makes sense if this total is less than the remaining costs of your existing loan.
Conclude a new contract and carry out the settlement: Once the new bank approves, they will either transfer the loan amount to you or directly to the old bank to settle the existing loan. This completes the loan settlement with another bank.
Carefully following these steps ensures that you actually save money in the end and avoid falling into a cost trap.
Expert Tip: Avoid Legal Pitfalls with Early Repayment Charges
The prepayment penalty is a fee that banks charge for the loss of interest income when a loan is repaid early. However, its amount is strictly regulated by law. According to § 502 of the Civil Code (BGB), the penalty for installment loans can be a maximum of one percent of the remaining balance to be repaid. If your loan has less than twelve months remaining, this rate drops to 0.5 percent.
An example: With a remaining balance of 12,000 euros, the bank may charge you a maximum of 120 euros as compensation. Our expert tip: Examine your bank's claim carefully. In the past, calculations were often incorrect, which can lead to savings of several hundred euros. A free online calculator for prepayment penalties can provide initial clarity here. Incidentally, no prepayment penalty is incurred for overdraft facilities, which makes debt restructuring particularly attractive here.
Choosing the right debt consolidation loan: More than just the interest rate matters
The lowest interest rate is not always the best offer. When choosing a new loan, look for flexible contractual terms that suit your life situation. These features are crucial:
Free extra repayments: The ability to make additional payments without fees at any time shortens the loan term and saves interest. Many banks allow annual extra repayments of up to ten percent of the loan amount.
Payment breaks: Some providers offer the option to defer one or two instalments per year, which can be helpful during financial constraints.
Same or lower monthly instalment: The new instalment should not strain your budget more than the old one. With an online calculator to adjust the loan instalment, you can find the optimal monthly burden.
Fast digital processing: A fully digital application process often accelerates the disbursement to under 48 hours.
A loan with an interest rate 0.1 percentage points higher but with flexible repayment options can be the better choice in the long term. This way, you secure not only financial advantages but also the necessary flexibility for the future.
Improve creditworthiness through targeted debt restructuring
Debt restructuring can significantly improve your credit rating. By consolidating multiple small loans or installment payments into a single loan, you send a positive signal to credit agencies like SCHUFA. Rather than managing five different liabilities, you only manage one, which is seen as a sign of financial organization and control. This often leads to a direct improvement in your credit score.
An improved score of, for example, 20 points can mean the difference between loan approval and rejection. In the long run, you benefit from this effect, as you receive considerably better terms for future financing, such as for a car or a property. Debt restructuring for credit improvement is thus a strategic decision for your financial future. Timely installment payments over twelve months further solidify this positive effect.
Practical example: Over 2,000 euros saved through refinancing
A concrete calculation example illustrates the potential savings. Suppose you have an old loan with an outstanding debt of 20,000 euros, a remaining term of 48 months, and an effective annual interest rate of nine percent. Your monthly installment is around 500 euros.
You find a refinancing offer with an effective annual interest rate of four percent for the same term. The new monthly installment would only be about 451 euros – a monthly saving of 49 euros. Over the entire 48 months, the savings add up to 2,352 euros. Even after deducting the maximum early repayment penalty of one percent (200 euros), a net gain of 2,152 euros remains. This example shows how a consolidation of multiple loans can reduce the burden. Switching from an expensive overdraft loan to an installment loan can even allow for higher savings of over ten percentage points.
Act now and secure financial freedom
Refinancing an expensive loan is one of the most effective ways to reorganise your finances and save money in the long run. With the insights from this guide, you can assess the offers from direct banks, avoid cost traps, and strengthen your negotiating position. Don’t wait until high interest rates unnecessarily strain your budget. Every month without optimisation costs you real money that you could better use for your goals and desires.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive concrete optimisation suggestions.
More useful links
The Bundesbank offers detailed statistics on interest rates for consumer loans to private households, especially installment loans.
Comprehensive statistics on deposit and lending rates are also available from the Bundesbank.
The Federal Statistical Office (Destatis) provides information on assets and liabilities in Germany.
A recent press release about the overindebtedness of private households can be found at the Federal Statistical Office (Destatis).
Deloitte offers insights and analyses on the German credit market.
The KfW Banking Group delivers analyses and forecasts on the credit market.
Results of the Bank Lending Survey in Germany are available from the Bundesbank.
The Consumer Advice Centre provides helpful information and savings options related to loans and credits.
FAQ
What is the difference between refinancing and follow-up financing?
A debt restructuring involves switching to a new bank to pay off an existing loan and benefit from better terms. In contrast, follow-up financing takes care of the continued financing of an expiring property loan, often with the same bank.
What documents do I need for a loan application for debt restructuring?
As a rule, you will need your last three pay slips, your bank statements, a copy of your identity card, the contract documents, and a settlement certificate for your old loan.
Can I increase the loan amount during refinancing?
Yes, many banks also offer an increase in the loan amount as part of debt restructuring. This requires appropriate creditworthiness and is reviewed in the same application process.
Is there a prepayment penalty when refinancing an overdraft facility?
No, there is no early repayment fee when replacing an overdraft facility. You can replace it at any time with a more affordable installment loan without any additional costs.
How do I find the best time for refinancing?
The best time is when the general level of interest rates is significantly lower than the interest rate of your existing contract. Currently, we are in a phase where many loans taken out a few years ago are more expensive than new offers.
What happens if my debt restructuring application is rejected?
A rejection initially has no negative consequences, as a conditions request is SCHUFA-neutral. Your old loan will simply continue. You can check your creditworthiness and try again at a later point or bring in a second co-borrower.
