Restructuring personal debt: How to reorganise your finances with a structured loan
13.05.2025
11
Minutes
Katrin Straub
Managing Director at nextsure
Multiple loans, high interest rates and an increasingly unclear overview are weighing on your financial situation? Refinancing private debt into a structured loan can be the solution. Discover how you can lower your monthly instalments and regain control.
The topic in brief and concise terms
Debt consolidation combines several expensive loans into a cheaper loan, saving interest and improving your overview.
Early repayment compensation for instalment loans is legally limited to a maximum of one per cent of the remaining debt.
In the long term, debt restructuring improves the SCHUFA score, as the number of creditors decreases and the financial situation appears more orderly.
Analyse the financial burden of fragmented debts
Many households in Germany manage more than one loan at the same time. An overdrawn overdraft facility at twelve per cent interest, a credit card bill of €2,500 and a 0% finance deal that is about to expire are not uncommon. This multitude of payment obligations significantly reduces monthly liquidity and often costs several hundred euros a year in interest alone. The greatest risk lies in the lack of an overview, which makes effective repayment more difficult. A typical scenario with three loans can quickly lead to a total monthly burden of over €500. A careful household budget is the first step towards uncovering these hidden costs. Complexity increases with every additional liability and often prevents strategic planning for debt reduction.
Regain financial control through a structured loan
Refinancing private debt into a structured loan is a tried-and-tested way to ease financial pressure. You take out a new loan whose amount is sufficient to settle all existing liabilities at once. Instead of paying three or four instalments to different creditors, you now pay just one manageable instalment to a bank. The key advantage lies in the interest rate, which for an instalment loan is often only four to six per cent, whereas overdrafts not infrequently cost twice as much. Even an interest-rate difference of one percentage point can mean savings of hundreds of euros over the term. By consolidating, you not only free up financial resources, but also regain full control over your commitments. This step can significantly reduce your monthly burden, as a look at an online calculator for adjusting your loan instalment shows. This creates the basis for orderly wealth building.
Four steps to successful debt restructuring
A structured process is the key to successful debt restructuring. With the right preparation, you can manage the switch efficiently and secure the best terms. Follow the sequence below to avoid mistakes:
Record all debts in full: List all existing loans with the outstanding balance, interest rate and monthly instalment. Do not forget your overdraft facility or instalment payments with mail-order retailers.
Take stock of your finances: Draw up a detailed household budget covering all income and expenses. This will show you the maximum monthly instalment you can manage for the new loan, strengthening your negotiating position.
Compare offers: Obtain at least three different offers for a debt consolidation loan. Always pay attention to the effective annual interest rate, as this includes all costs.
Settle old loans: After the new loan agreement is finalised, the new bank transfers the loan amount. Inform your old creditors of the early repayment and obtain confirmation.
This process not only helps you consolidate several loans, but also ensures that you find the most favourable solution for your needs.
Quantifying savings: a clear calculation example
The theoretical benefits of refinancing are best illustrated with a concrete example. Let us assume a household with three different liabilities, which are now to be bundled into a single loan.
Initial situation (before):
Overdraft: €5,000 at eleven per cent interest.
Instalment loan: €8,000 at eight per cent interest.
Credit card: €2,000 at fourteen per cent interest.
Total debt: €15,000 with a weighted average interest rate of around 9.7 per cent.Situation after refinancing (after):
New instalment loan: €15,000 at five per cent interest.
Savings: The interest burden is almost halved.
By this measure alone, the household saves more than €2,000 in interest costs over the next five years. The monthly instalment becomes more predictable and lower, which immediately increases financial flexibility. This turns a burdensome situation into an opportunity to save interest in the long term.
Expert knowledge: mastering legal pitfalls in refinancing
When loans are repaid early, banks may charge a so-called early repayment fee. This fee is intended to compensate the bank for lost interest income. For instalment loans, however, the amount is legally limited: it may amount to a maximum of one per cent of the outstanding debt if the loan still runs for more than twelve months. If the remaining term is less than one year, the limit falls to 0.5 per cent. An important exception is provided by the German Civil Code (BGB). Under Section 489 of the 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 mortgage loans and a decisive lever for getting rid of expensive old contracts. Anyone who wants to pay off an expensive overdraft loan in particular usually does not need to worry about this compensation, as overdrafts can be terminated at any time.
Improve your credit rating strategically: the effect of debt consolidation on SCHUFA
Debt restructuring has a direct impact on your credit assessment with credit reference agencies such as SCHUFA. Initially, the credit application creates a new entry, which can slightly lower your score in the short term. In the long term, however, the positive effects far outweigh this. By replacing several small loans, the number of your lenders is reduced, which SCHUFA assesses positively. A single instalment loan instead of three or four liabilities signals an orderly financial situation. Timely instalment payments for the new loan steadily improve your score over time. Good creditworthiness is the prerequisite for favourable terms on future financing. Thus, debt restructuring is also a strategic tool for optimising creditworthiness and can even avert looming personal insolvency.
To get the most out of your debt refinancing, you should look beyond a simple interest rate comparison. Pay attention to the terms and conditions of the new loan, as there are often further savings to be made here.
Free additional repayments: Arrange the option to make free extra repayments at any time. This allows you to pay off the loan more quickly when unexpected income comes in and save on interest.
Payment holidays: Check whether the agreement includes the option of one or two payment holidays per year. This offers flexibility during financial shortfalls.
Include a second borrower: If possible, add a second borrower with good creditworthiness to the agreement. This often improves the terms by more than half a percentage point.
Check residual debt insurance: Residual debt insurance is often expensive and not always necessary. Omit it if you are already covered elsewhere, for example by term life insurance.
These details are crucial not only to refinance credit card debt, but to create an all-round optimised financing solution. Refinancing despite a negative SCHUFA is also possible with specialised providers, but it requires particularly careful scrutiny of the terms. Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific suggestions for improvement.
More useful links
The Federal Statistical Office (Destatis) provides comprehensive information on assets and liabilities in Germany.
A press release from the Federal Statistical Office (Destatis) highlights current data on the topic of debt.
The Bundesbank provides information on household debt in Germany, particularly in the context of the residential property market.
The Federal Agency for Civic Education (bpb) highlights over-indebtedness among private households in the context of the social situation in Germany.
The Friedrich Ebert Foundation (FES) provides a study on private debt in Germany.
Statista provides a statistic on the development in the number of debtors in Germany since 2004.
Statista provides data on individual debt levels in Germany.
Statista shows a statistic on the causes of debt in Germany from 2008.
Wikipedia provides a detailed article on the topic of over-indebtedness.
FAQ
What is the difference between refinancing and follow-on financing?
When you refinance, you change your lender in order to benefit from better terms. By contrast, a follow-on financing arrangement is an extension of a loan that is coming to an end with the same bank, often on new terms.
How high can the early repayment charge be?
For consumer loans concluded after 10 June 2010, compensation is capped by law. It amounts to a maximum of 1.0 per cent of the outstanding balance when more than one year of term remains, and 0.5 per cent when less than one year remains.
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. The duration depends on the completeness of your documents and the banks’ processing time.
Can I also refinance if I have a negative SCHUFA entry?
Yes, refinancing is also possible with negative SCHUFA entries, but the terms are often worse. There are specialised brokers and banks that grant loans in such cases; a careful review of the offers is particularly important here.
What happens to my residual debt insurance when I refinance?
If you pay off the old loan, you can cancel the associated residual debt insurance. As a rule, you will receive a pro-rata refund of the unused insurance contributions.
Should I use a loan broker for a refinancing loan?
An independent credit broker can be worthwhile, as they can compare offers from many different banks and often have access to special terms. This can save you time and lead to a better interest rate.
