Say goodbye to the interest trap: How you can save hundreds of euros a year by consolidating credit card debt into a favourable instalment loan
21/05/2025
10
Minutes
Katrin Straub
Managing Director at nextsure
Are you also piling up credit card statements with dizzyingly high interest rates? You’re not alone, because more than five million Germans are considered overindebted, often due to expensive consumer loans. Discover how consolidating credit card debt into an affordable instalment loan can not only lower your monthly repayments, but also secure your financial future.
The topic in brief and concise terms
Debt restructuring can reduce the interest burden of credit cards (often over 18 percent) to an instalment loan (often under 6 percent), and so save hundreds of euros per year.
By consolidating several debts into a single instalment, you gain a clearer overview and improve your Schufa score in the long term.
The prerequisites for successful debt restructuring are a regular income, a positive SCHUFA credit report and a detailed household budget.
Recognise the credit card cost trap and avoid interest rates of over 15 per cent
Many credit card providers tempt customers with flexibility, but the costs are hidden in the detail, often with interest rates of 18 per cent and more. For €5,000 of debt, that means annual interest costs of €900, without any of the principal being repaid. The instalment payment function means you only pay off a small amount of the debt each month, causing the interest burden to grow steadily. This spiral of interest is the main reason why consolidating credit card debt into a low-cost personal loan is often the only sensible step. A summary of overdrafts and credit cards can provide additional clarity here. The high interest rates are not only expensive, but also have a lasting negative impact on your creditworthiness. An uncontrolled mountain of debt signals a high risk to financial institutions, making future financing more difficult. The first step towards improvement is therefore to know the exact terms of your cards and calculate the annual costs. Only with this knowledge does the full extent of the problem and the potential savings from consolidation become clear.
Halving interest costs: An example calculation for refinancing
Consolidating credit card debt into a favourable instalment loan drastically reduces costs, often by more than 50 per cent. Imagine you have €7,000 of credit card debt at a typical interest rate of 18 per cent per year. Your monthly interest burden alone is €105. An instalment loan with an interest rate of five per cent would reduce this burden to just €29 per month. That is a monthly saving of €76, which corresponds to €912 per year. This calculation shows how a single measure can create significant financial breathing room. Consolidating multiple loans amplifies this effect even further. The benefits go beyond interest savings alone:
Planning certainty: You have a fixed monthly instalment and a defined term of, for example, 48 months.
Faster debt reduction: A larger share of your instalment goes towards repayment rather than interest.
Better credit rating: A single instalment loan is assessed more positively by Schufa than several maxed-out credit card limits.
No early repayment penalty: When paying off credit card debt, there is usually no penalty fee.
These concrete benefits make refinancing a powerful tool for your financial health.
Step by step to successful refinancing
Debt restructuring is a clearly structured process that begins with careful preparation. Even an interest rate difference of 0.2 percentage points can make debt restructuring worthwhile. To obtain the best terms, you should follow these five steps:
Determine debts precisely: List all outstanding amounts on your credit cards so you know the loan amount you need.
Review finances: Create a detailed household budget to determine the maximum monthly instalment you can afford.
Compare offers: Obtain several loan offers and compare the annual percentage rate, not just the nominal interest rate.
Apply for the loan: Submit the application with all required documents, such as payslips and a copy of your ID.
Repay old debts: After the new loan has been paid out, immediately settle the full balances of your old credit cards.
It is particularly important not to fall back into old habits after the restructuring and to avoid using the credit cards again. This disciplined approach ensures the long-term success of your debt restructuring. The next section examines the legal framework you should be aware of.
Expert tips: legal aspects and SCHUFA optimisation
When refinancing credit card debts into a favourable instalment loan, legal details and the impact on your creditworthiness are crucial. Consumer credit agreements are governed by sections 491 and following of the German Civil Code (BGB), which grant you important rights as a consumer. This includes a 14-day right of withdrawal after the contract is concluded. Refinancing will, in the short term, lead to a credit enquiry and a new entry with SCHUFA, which can temporarily lower your score slightly. In the long term, however, a repaid instalment loan significantly improves your creditworthiness, as it signals reliability. A single consolidated loan is assessed more positively than several outstanding liabilities. Our expert tip: look for the option of free additional repayments in the new loan agreement. Many banks allow you to repay up to 50 per cent of the remaining debt per year in addition, which speeds up your becoming debt-free. Such an agreement gives you the flexibility you need if your financial situation improves. With this knowledge, you can avoid impending personal insolvency and sustainably repair your finances.
Creating the right conditions for a favourable debt consolidation loan
Banks assess the same criteria when you refinance as they do for any other loan application. To obtain the best interest rates, good creditworthiness is essential. A Schufa score of over 95 per cent is considered a good basis for negotiations. The following requirements are usually necessary:
Age of majority and residence: You must be at least 18 years old and have a permanent residence in Germany.
Regular income: A permanent employment contract beyond the probation period is an important requirement for most banks.
Positive Schufa report: Negative entries can make refinancing more difficult, but they do not make it impossible.
Existing bank account: A German bank account is required to process the loan.
Even with less than ideal Schufa, refinancing can still succeed, but often at slightly higher interest rates. A transparent presentation of your financial situation and the planned, structured reduction of debt can convince lenders. An existing instalment loan can also be refinanced to benefit from better terms. With the right preparation, you lay the foundation for a successful financial restructuring.
Conclusion: Regain financial freedom through strategic debt restructuring
Debt restructuring of credit card balances into an affordable instalment loan is more than just a financial transaction; it is a strategic step towards greater control and less stress. Instead of paying high monthly interest rates of up to 20 per cent, an instalment loan enables predictable repayment at interest rates often below six per cent. Bringing several debts together into a single instalment not only improves clarity, but also strengthens your Schufa profile in the long term. The process requires discipline, from a precise analysis of your debts to the consistent repayment of the new loan. The greatest benefit is regaining financial flexibility and the reassurance that you are actively and efficiently reducing your own debt. A loan redemption with another bank can often secure the best terms. Use this opportunity to break out of the vicious circle of expensive debt. Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Statista offers a comprehensive topic page on loans and debt.
The Federal Statistical Office (Destatis) provides official information on assets and debt in Germany.
Statista offers a statistic on individual debt levels in Germany.
The Bundesbank publishes statistics on interest rates and yields for consumer loans, particularly instalment loans.
Statista provides data on the volume of consumer loans in Germany.
The Bundesbank offers detailed MFI interest rate statistics on outstanding amounts and new business.
The Verbraucherzentrale offers a research report on consumer loans, credit experiences and credit attitudes.
The Tagesschau looks at the topic of Schufa and instalment loans in an article.
The Bankenfachverband provides information on the overall market for financial services.
FAQ
What is the first step in consolidating credit card debt?
The first and most important step is to get an accurate overview of all existing debts. Add up the outstanding balances on all credit cards to determine the total amount you need to refinance.
How do I find the best instalment loan for debt consolidation?
Compare offers from several banks. Pay attention to the effective annual interest rate, as this includes all the costs of the loan. Use online comparison calculators to quickly find suitable terms without affecting your credit score.
Can I also top up the refinancing loan for other purposes?
Yes, many banks offer the option of increasing the loan amount when refinancing. So you can borrow more money than you need purely to pay off the old debts, giving yourself additional financial flexibility.
What happens to my old credit cards after the refinancing?
After you have settled the debts with the new loan, you should either cancel the old credit cards or at least restrict their use significantly to avoid building up debt again. Cancellation is also possible even if there are existing debts, provided these are paid off as part of the debt restructuring.
How long does a debt restructuring take?
The process from submitting the application to the disbursement of the money can be very quick. After online identification and submitting all documents, the loan amount is often transferred to your account within 24 to 48 hours.
What documents do I need for the application?
Typically, you will need your last three payslips, complete bank statements for the last 30 days, a copy of your identity card and, ideally, the loan agreements or statements for the liabilities to be repaid.
