Consolidating multiple small loans into one instalment: Regaining financial control
29.04.2025
6
Minutes
Katrin Straub
Managing Director at nextsure
Are you juggling multiple instalments for small loans and losing track? Debt consolidation can simplify your finances and save you hundreds of euros a year. Discover how you can regain full control with just one instalment.
The topic in brief and concise terms
Debt consolidation bundles several loans into one repayment, which improves clarity and can reduce the monthly burden.
Consolidating loans can have a positive effect on your SCHUFA score, as a single loan signals a lower risk.
The costs for early loan repayment (early repayment charge) are legally capped at a maximum of one per cent of the remaining debt.
Breaking out of the cost trap of small loans
Many consumers underestimate the total cost of three or more small loans, which are often five per cent above the market average. Managing separate instalments for the smartphone, the furniture and the latest car repair leads to a confusing financial situation. Simply switching from an expensive overdraft facility to an instalment loan can reduce interest costs by more than 50 per cent. Such financial fragmentation can lower your SCHUFA score by more than ten points, as several outstanding loans are assessed as a higher risk. By consolidating several loans, you not only regain an overview, but also create a solid foundation for your financial future. This financial reorganisation is the first step towards a more efficient and stress-free household budget.
Create financial clarity with a single loan
Refinancing several small loans into one instalment consolidates your debts into a single, clear loan. An interest rate saving of just 0.2 percentage points can already mean savings of several hundred euros over the term. The process for a new financial overview can be completed in four clear steps:
List liabilities: Record all loans with outstanding balance, interest rate and monthly instalment to determine a total sum of, for example, 15,000 euros.
Obtain loan offers: Obtain at least three comparison quotes for a refinancing loan for the determined total amount.
Cost-benefit analysis: Compare the interest savings with the possible costs, such as a prepayment penalty of up to one per cent.
Contract conclusion and settlement: After signing the new contract, the new bank will usually pay off the old loans directly within seven working days.
This consolidated approach reduces your monthly administrative effort by at least 75 per cent. The clear structure with just one instalment makes budgeting easier and prevents missed payments, paving the way for better creditworthiness.
Actively improve creditworthiness and signal financial stability
The consolidation of three or more loans into a single loan is viewed positively by SCHUFA and can improve your score by up to 15 points. A single instalment loan that is serviced properly signals far greater financial control than several small liabilities. Banks see customers with just one loan as 20 per cent less risky. Reducing the number of your creditors is a clear sign of financial consolidation and stability. Use debt restructuring to improve your creditworthiness to secure better terms for future financing in the long term. The financial order created in this way is the basis for the next step: analysing potential hurdles in the debt restructuring process.
Navigate legal hurdles and cost traps safely
When repaying old loans early, a prepayment charge may apply, but it is clearly limited by law. Under Section 502 of the German Civil Code (BGB), this may amount to a maximum of one per cent of the remaining outstanding balance for consumer loans. If your loan runs for less than twelve months, this rate drops to 0.5 per cent. Our expert tip: Check your old loan agreement for errors in the withdrawal notice, which may rule out the bank’s right to compensation. The EU Consumer Credit Directive further strengthens your rights by ensuring a high level of transparency regarding borrowing costs. The following pitfalls should be avoided:
Incomplete listing of all existing debts.
Ignoring the prepayment charge in the cost calculation.
Taking out an expensive residual debt insurance policy without necessity.
Multiple loan enquiries on different portals within a short period, which temporarily lowers your credit rating.
Careful planning and knowledge of the legal framework are crucial to making the debt consolidation successful and cost-effective. With this knowledge, you can approach the process strategically.
The strategic path to successful debt restructuring
A successful debt consolidation begins with a precise review of your finances, which takes no longer than 60 minutes. Add together the outstanding balances of all loans to determine the exact sum for the new consolidation loan. Use online comparison calculators to submit non-binding enquiries about terms that do not negatively affect your SCHUFA score. A customer who bundles three loans with an average interest rate of eight per cent into a new loan at five per cent interest saves over EUR 300 a year on an outstanding balance of EUR 10,000. Once you have found the right offer, the new bank often takes care of the entire repayment process for you. With the right strategy, you can not only pay off an expensive overdraft facility, but also optimise your entire financial structure. Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific optimisation suggestions.
More useful links
Wikipedia explains the term debt restructuring in general.
The Consumer Advice Centre gives tips on saving money on loans and advances.
The Federal Statistical Office provides statistical information on assets and debts in Germany.
A press release from the Federal Statistical Office deals with a specific topic.
The Deutsche Bundesbank includes statistics on household debt in Germany, especially in relation to the residential property market.
Under Gesetze im Internet you can find the Banking Act (KredWG).
An investigation report by the Consumer Advice Centre deals with consumer loans, borrowing experiences and attitudes towards credit.
The Federal Agency for Civic Education provides information on the issue of over-indebtedness among private households.
The Gabler Business Dictionary provides a definition of debt restructuring.
FAQ
What requirements do I need to meet for refinancing?
The requirements are similar to those for a standard loan application: you need a regular income, must be of legal age and demonstrate sufficient creditworthiness (credit rating). A clean payment history is an advantage.
How long does a debt restructuring take?
The entire process, from submitting the application to repaying the existing loans, usually takes between one and three weeks. This depends on the speed of the banks involved and the completeness of your documents.
Can I also refinance an overdraft or credit card debt?
Yes, in particular, refinancing expensive overdraft facilities or credit card debts into a cheaper instalment loan makes a lot of sense. This is where the potential savings are greatest due to the high interest rates for these types of credit.
What is the early repayment charge?
The prepayment penalty is a fee that the bank charges as compensation for the interest it loses due to the early repayment of your loan. For instalment loans, it is legally capped at one per cent of the remaining balance.
Do I have to cancel the old loans myself?
No, in most cases the new bank offers a switch service. This means it contacts your previous creditors, requests the exact outstanding balance and takes care of settling the loan in full for you.
Can I also increase the new loan amount?
Yes, as part of debt restructuring you can often also increase the new loan amount to give yourself additional financial flexibility. The prerequisite is that your creditworthiness is sufficient for the higher amount.
