Boost your creditworthiness through debt restructuring: A strategic guide to financial optimisation
05.05.2025
9
Minutes
Katrin Straub
Managing Director at nextsure
Are high interest rates and confusing instalment payments eating up your monthly budget? A well-considered debt consolidation can reduce your financial burden by up to 50 per cent while also strengthening your creditworthiness. Discover how you can regain control of your finances with a single, lower monthly payment.
The topic in brief and concise terms
Debt consolidation combines several loans into a single, more favourable rate and improves your financial overview.
Reducing the number of creditors and making payments on time has been proven to increase your SCHUFA score.
In particular, paying off expensive overdraft and credit card debts offers significant savings potential and strengthens creditworthiness.
Initial situation: How fragmented debts weaken your creditworthiness
Several ongoing loans signal a potentially higher risk of default for banks. Three small loans are often assessed more negatively than a single, larger loan, even with the same total debt. Credit agencies such as SCHUFA take the number of credit commitments into account in their scoring, which means that many agreements can reduce creditworthiness by 20 points or more. Combining several loans into a single instalment improves clarity and is viewed positively by creditors. A combination of several loans is therefore an important first step. This financial reorganisation not only simplifies your household budgeting, but also lays the foundation for better creditworthiness.
Debt restructuring mechanism: One loan instead of many problems
When you refinance, you take out a new loan to pay off all existing liabilities in one go. The aim is to benefit from a lower interest rate, often three to five percentage points below that of overdraft or credit card debt. An example: three loans with an average interest rate of nine per cent are replaced by a new loan at four per cent interest, which reduces interest costs by more than half. This step results in a single, predictable monthly instalment and immediately relieves financial pressure. A clear financial overview through refinancing is the biggest advantage. This not only gives you greater financial flexibility, but also lays the groundwork for a positive creditworthiness development.
Credit boost: The direct effect on your SCHUFA score
Debt restructuring has a direct positive effect on your SCHUFA score as soon as the old loans are reported as “settled”. The reduction in the number of lenders from, for example, four to one is interpreted by SCHUFA as a reduction in risk. A customer who reliably services a single loan of 10,000 euros is considered more creditworthy than someone with five loans of 2,000 euros each. Regular and punctual payment of the new, single instalment improves your score steadily over the next twelve months. Even financing despite poor credit rating becomes more realistic in future as a result. The improved credit rating opens the door to better terms for future financing.
Practical guide: Four steps to successful refinancing
A structured approach is the key to success. These four steps will help you successfully refinance:
Record all debts in full: List all loans with remaining balance, interest rate and monthly instalment to determine the total amount of, for example, 15,000 euros.
Create a household budget: Compare your monthly income of 3,000 euros with fixed expenses of 1,800 euros to determine the maximum possible new instalment.
Compare loan offers: Obtain at least three offers via a SCHUFA-neutral terms enquiry to find the best interest rate.
Carry out the refinancing: Once the new loan has been disbursed, pay off all old liabilities, such as expensive credit card debts.
This systematic planning ensures that you receive the best possible terms and do not overlook any liabilities.
Common pitfalls and how to navigate them skilfully
Watch out for potential cost traps so as not to jeopardise the success of your debt restructuring. Here are the most common hurdles:
Early repayment charge: Banks may charge a fee for early repayment, capped at a maximum of one per cent of the outstanding balance for personal loans.
Hidden costs: Focus solely on the annual percentage rate (APR), as this includes all loan costs.
Payment protection insurance: Do not take out an expensive payment protection policy if it is not absolutely necessary for the better interest rate.
Lack of flexibility: Choose a loan that allows free special repayments of at least five per cent per year.
A careful comparison of the contract details, especially when repaying an expensive overdraft facility, protects you from unexpected expenses.
Expert tip: When refinancing is particularly worthwhile
Debt restructuring is particularly effective if you have expensive liabilities with interest rates of over eight per cent. This applies above all to overdrafts, whose interest rates are often above twelve per cent. Combining several credit card and catalogue debts also offers enormous savings potential, often of more than €500 per year. Our expert tip: Consider debt restructuring even if your credit rating has improved since you took out your older loans, so you can benefit from significantly lower interest rates. In complex cases, professional advice, such as that offered by nextsure, can help you find the optimal solution. Even with negative entries, debt restructuring with specialised providers is often still possible. With the right strategy, the path to better finances is clear.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific optimisation suggestions.
More useful links
The German Federal Bank offers detailed statistics on the credit markets.
Wikipedia provides a comprehensive article on the topic of creditworthiness.
The DIW (German Institute for Economic Research) provides information on over-indebtedness among private households.
The official service Gesetze im Internet provides the legal text on loan agreements (§ 488 BGB).
Statista offers a statistic on the average interest rate for consumer loans in Germany.
FAQ
What exactly does debt restructuring mean?
Debt restructuring means replacing one or more existing loans with a new, single loan. The aim is to benefit from better conditions such as lower interest rates and a single, manageable monthly instalment.
Which loans can I refinance?
In principle, almost all types of loans can be refinanced. These include personal loans, car loans, overdrafts and credit card debt. For mortgage financing, special rules regarding the fixed-interest period often apply.
What documents do I need for a debt restructuring application?
As a rule, you will need your last three payslips, your bank statements, a copy of your identity card and the existing loan agreements with the exact outstanding balances.
How does a loan enquiry for refinancing affect SCHUFA?
Make sure that the bank only submits a „conditions enquiry“ and not a „credit enquiry“. A conditions enquiry is SCHUFA-neutral and does not affect your score, whereas several credit enquiries can worsen it.
How do I find the best deal for debt refinancing?
Use online comparison portals to get an overview of the current terms and conditions. When doing so, enter “refinancing” as the purpose, as banks often offer better interest rates for this.
Can I borrow more money than I need for the refinancing?
Yes, many banks allow you to increase the loan amount as part of a refinancing. For example, you can apply for €15,000 to pay off old debts and an additional €2,000 for a new purchase.
