Restructuring private debt: How to reorganize your finances with a structured loan
13 May 2025
12
Minutes
Katrin Straub
CEO at nextsure
Multiple loans, high interest rates, and a dwindling overview weighing down your financial situation? Restructuring private debts into a consolidated loan could be the solution. Discover how you can reduce your monthly payments and regain control.
The topic in brief and concise terms
Debt restructuring consolidates multiple expensive loans into a more affordable one, saving interest and improving clarity.
The prepayment penalty for installment loans is legally capped at a maximum of one percent of the remaining debt.
In the long term, rescheduling improves the SCHUFA score because the number of creditors decreases and the financial situation appears more organised.
Analyse the financial burden of fragmented debts
Many households in Germany manage more than one loan at the same time. An overdraft with twelve percent interest, a credit card bill of €2,500, and a zero-percent financing deal that is about to expire are not uncommon. This multitude of payment obligations significantly reduces monthly liquidity and can often cost several hundred euros a year in interest alone. The greatest danger lies in the lack of oversight, which makes effective repayment difficult. A typical scenario with three loans can quickly lead to a total monthly burden of over €500. A careful budget calculation is the first step to uncovering these hidden costs. The complexity increases with each additional liability and often prevents strategic planning of debt reduction.
Regain financial control through a structured loan
Debt consolidation by restructuring private debt into a structured loan is a proven method for financial relief. This involves taking out a new loan, the amount of which is sufficient to pay off all existing liabilities at once. Instead of making three or four payments to different creditors, you will only pay one manageable instalment to a bank in the future. The key advantage lies in the interest rate, which is often only four to six percent with an instalment loan, whereas overdraft facilities often cost double that. Even an interest rate difference of one percentage point can mean savings of hundreds of euros over the term. By consolidating, you not only gain financial resources but also regain full control over your obligations. This step can significantly reduce your monthly burden, as a look at an online calculator for adjusting the loan rate shows. In this way, you lay the foundation for structured wealth building.
In four steps to successful refinancing
A structured process is key to a successful debt restructuring. With the right preparation, you can manage the transition efficiently and secure the best terms. Follow the sequence below to avoid mistakes:
Fully record debts: List all existing loans with outstanding balance, interest rate, and monthly instalment. Don't forget overdraft facilities or instalment payments with mail-order companies.
Take stock: Create a detailed household budget with all income and expenses. This way, you can determine the maximum affordable monthly instalment for the new loan, enhancing your negotiation position.
Compare offers: Obtain at least three different offers for a restructuring loan. Always pay attention to the effective annual interest rate, as this includes all costs.
Pay off old loans: After concluding the new loan agreement, the new bank transfers the loan amount. Inform your old creditors about the early repayment and obtain confirmation.
This process not only helps you consolidate multiple loans but also ensures that you find the most favourable solution for you.
Quantifying savings: A clear calculation example
The theoretical advantages of refinancing can best be illustrated with a concrete example. Let's consider a household with three different liabilities that are now to be consolidated into a single loan.
Initial Situation (before):
Overdraft: 5,000 Euros at eleven percent interest.
Instalment loan: 8,000 Euros at eight percent interest.
Credit card: 2,000 Euros at fourteen percent interest.
Total debt: 15,000 Euros with a weighted average interest rate of about 9.7 percent.Situation after refinancing (after):
New instalment loan: 15,000 Euros at five percent interest.
Savings: The interest burden is nearly halved.
Just through this measure, the household saves more than 2,000 Euros on interest costs over the next five years. The monthly instalment becomes more predictable and lower, which immediately increases financial flexibility. Thus, a burdensome situation is transformed into an opportunity to sustainably save on interest.
Expert Knowledge: Navigating Legal Pitfalls in Debt Restructuring
When it comes to early repayment of loans, banks can demand what is known as an early repayment penalty. This fee is intended to compensate the bank for the loss of interest income. However, in the case of installment loans, its amount is legally limited: it may not exceed one percent of the remaining debt if the loan term is longer than twelve months. If the remaining term is less than a year, the limit decreases to 0.5 percent. The Civil Code (BGB) offers an important exception. According to § 489 BGB, you can terminate any loan agreement after a term of ten years with six months' notice, completely free of charge. This special right of termination is particularly relevant for long-term real estate loans and a crucial lever for getting rid of expensive old contracts. Especially those who want to repay an expensive overdraft facility usually do not have to worry about this compensation, as overdrafts can be terminated at any time.
Improve Creditworthiness: The Effect of Debt Restructuring on SCHUFA
Debt restructuring directly affects your credit rating at credit agencies like SCHUFA. Initially, the credit inquiry leads to a new entry, which can slightly reduce the score in the short term. However, in the long run, the positive effects far outweigh this. By consolidating several small loans, the number of your lenders is reduced, which is positively assessed by SCHUFA. A single installment loan instead of three or four obligations signals an orderly financial situation. Timely installment payments for the new loan continuously improve your score over time. A good credit rating is the prerequisite for favourable terms in future financing. Thus, debt restructuring is also a strategic tool for credit optimization and can even avert a pending personal insolvency.
Our expert tip: Take advantage of hidden potentials in debt restructuring
To get the most out of your debt restructuring, you should look beyond just comparing interest rates. Pay attention to the contractual details of the new loan, as they often hide further savings potential.
Free additional repayments: Arrange the option to make free additional repayments at any time. This way, you can repay the loan faster with unexpected income and save on interest.
Payment breaks: Check whether the contract includes the option for one or two payment breaks per year. This provides flexibility during financial constraints.
Include a second borrower: If possible, include a second borrower with good creditworthiness in the contract. This often improves the conditions by more than half a percentage point.
Review residual debt insurance: Residual debt insurance is often expensive and not always necessary. Forgo it if you are already covered by other means, such as a term life insurance.
These details are crucial not only for restructuring credit card debt but also for creating a thoroughly optimised financial solution. A debt restructuring despite a negative SCHUFA is also possible with specialised providers, but requires particularly careful examination of the conditions. Request your individual risk analysis now: Have your insurance situation checked for free and receive concrete optimisation suggestions.
More useful links
The Federal Statistical Office (Destatis) offers comprehensive information on wealth and debt in Germany.
A press release from the Federal Statistical Office (Destatis) sheds light on current data related to debt.
The Bundesbank provides information on the debt situation of private households in Germany, particularly in the context of the residential real estate market.
The Federal Agency for Civic Education (bpb) examines the over-indebtedness of private households within the social situation in Germany.
The Friedrich Ebert Foundation (FES) provides a study on private debt in Germany.
Statista offers statistics on the development of the number of debtors in Germany since 2004.
Statista provides data on individual debt levels in Germany.
Statista presents statistics on the causes of debt in Germany from the year 2008.
Wikipedia offers a detailed article on the topic of over-indebtedness.
FAQ
What is the difference between refinancing and follow-up financing?
With a debt restructuring, you change lenders to benefit from better terms. A follow-up financing, on the other hand, is the extension of a maturing loan with the same bank, often under new terms.
What is the maximum permissible early repayment penalty?
For consumer loans concluded after 10 June 2010, compensation is legally capped. It amounts to a maximum of 1.0 percent of the remaining debt for more than one year of remaining term and 0.5 percent for less than one year.
How long does refinancing take?
The entire process from application to the redemption of old loans typically takes between one and three weeks. The duration depends on the completeness of your documents and the processing time of the banks.
Can I refinance even if I have a negative SCHUFA entry?
Yes, refinancing is possible even with negative SCHUFA entries, but the terms are often worse. There are specialized brokers and banks that grant loans in such cases, so a thorough review of the offers is particularly important here.
What happens to my residual debt insurance when refinancing?
If you settle the old loan, you can cancel the associated residual debt insurance. You usually receive a proportional refund of the unused insurance contributions.
Should I use a credit broker for refinancing?
An independent credit broker can be worthwhile as they can compare offers from many different banks and often have access to special conditions. This can save you time and result in a better interest rate.
