Refinancing to reduce monthly insurance premiums: How to create financial flexibility
10 May 2025
12
Minutes
Katrin Straub
CEO at nextsure
High monthly loan payments strain your budget and prevent necessary expenses for your protection. A debt restructuring can reduce your monthly burden by up to fifty percent. Find out here how you can use this financial leeway for your insurance.
The topic in brief and concise terms
Debt restructuring can reduce your monthly credit burden by up to 50 percent, freeing up budget for important insurance policies.
Consolidating multiple loans improves clarity and can positively impact your credit score by reducing the number of credit entries.
The early repayment charge for installment loans is legally limited to a maximum of one percent of the remaining debt, which often makes debt rescheduling very attractive.
Analysis: How high credit rates threaten your financial security
The monthly burden of multiple loans is often underestimated and can quickly amount to hundreds of euros. An overdrawn overdraft facility typically costs nine percent interest, while installment loans often charge six percent or more. These expenses tie up capital that is needed for solid protection, such as disability insurance, which is available from as little as 30 euros a month. Many households could save over 500 euros a year simply by paying off an expensive overdraft facility. Replacing an expensive overdraft facility is often the first step. The ongoing financial burden not only prevents the building up of reserves but also the taking out of essential insurance policies.
Unlock potential: Halve your monthly burden through refinancing
Debt restructuring consolidates several expensive loans into a single loan with better terms. Even an interest rate difference of 0.2 percentage points can make refinancing worthwhile. Suppose you have an overdraft debt of €5,000 at ten percent interest and an instalment loan of €10,000 at eight percent. Your monthly interest burden amounts to over €100. A new loan of €15,000 at four percent interest would reduce this burden to €50. By consolidating multiple loans, the Schufa score often improves as only one liability remains. This financial reorganisation is the key to regaining room for important precautionary issues.
Make use of free spaces: From saved money to the right insurance
The financial flexibility gained from debt restructuring should be used strategically. Reducing the monthly loan payment by 50 euros already creates a budget for a solid term life insurance policy. This policy protects your family in an emergency with a sum of 150,000 euros or more. Our expert tip: After the restructuring, create a detailed household plan. List your income and the new, reduced expenses. This way, you can clearly see how much additional money is available for your security. The improvement of your creditworthiness can further facilitate future financing. Thus, pure cost savings become an active contribution to your financial security.
The 4-step plan for successful refinancing
A debt restructuring can be systematically implemented in four clear steps:
Assessment: List all existing liabilities with the loan amount, remaining term, and interest rate. A typical household often has two to three such items.
Obtain offers: Obtain non-binding offers for a refinancing loan in the amount of your total remaining debt. Pay attention to the annual percentage rate.
Check costs: Determine whether early repayment fees apply to your existing loans. For installment loans, this is limited to a maximum of one percent of the remaining debt.
Sign contract: After signing the new loan agreement, the new bank pays off the old loans directly. You will then only pay a single, lower installment.
This process, which often involves a loan transfer to another bank, usually takes no longer than 14 days.
Legal Frameworks and Expert Tips
The Civil Code (BGB) strengthens the rights of borrowers and facilitates debt restructuring. A key aspect is the capping of early repayment penalties for consumer loans taken out after 10 June 2010. If the remaining term is more than twelve months, the penalty must not exceed one percent of the outstanding debt. For a remaining term of less than one year, it is only 0.5 percent. Particularly important is the right of ordinary termination under Section 489 of the BGB: Loans with fixed interest rates can always be terminated after ten years with a notice period of six months, completely free of charge. Our expert tip: When restructuring existing loans, also check whether an expensive residual debt insurance can be cancelled, which further increases the savings.
Long-term benefits: More than just saved money
Debt restructuring to reduce monthly insurance premiums is more than a short-term cost-saving measure. It is a strategic step towards greater financial stability. With a single, lower payment, you not only regain control of your finances but also improve your creditworthiness. A tidy credit profile with just one loan instead of three or four has a positive impact. This effect not only makes it easier to obtain insurance but also facilitates future financing projects. A loan with a long term can further reduce the rate. This lays the foundation for a worry-free financial future.
Request an individual risk analysis now: Have your insurance situation checked for free and receive concrete optimisation suggestions.
More useful links
The Federal Statistical Office offers detailed tables and data on indebtedness in Germany.
The Deutsche Bundesbank provides statistics on interest rates for consumer loans to private households.
The Consumer Advice Centre Hamburg provides information on how insurance can be adjusted during financial difficulties.
Additionally, the Consumer Advice Centre Hamburg offers advice on cost reduction in private health insurance through tariff changes.
The Statistics Portal offers publications on housing in Germany.
The Federal Agency for Civic Education (bpb) provides information on over-indebtedness and private insolvency.
The German Insurance Association (GDV) offers an overview of statistics on the German insurance industry.
The Caritas provides information on online debt counselling.
Further statistics on deposit and loan interest rates can also be found at the Deutsche Bundesbank.
FAQ
What exactly is a debt restructuring?
When refinancing, you take out a new loan to repay one or more existing loans. The goal is to benefit from better terms, such as lower interest rates or a reduced monthly payment, and to improve your financial overview.
Which loans can I refinance?
Basically, you can refinance almost any loan. This includes installment loans (e.g., for cars, furniture), overdraft facilities, and even mortgage loans, although special conditions and notice periods apply to the latter.
What documents do I need for a debt restructuring?
Generally, you will need the loan agreements for your existing loans, which detail the remaining debt and the terms. Additionally, the new bank requires the usual creditworthiness proofs such as payslips and bank statements.
How long does refinancing take?
The process from application to refinancing the old loans usually takes between seven and 14 working days. The exact duration depends on the processing times of the banks involved.
Can I restructure my debt to increase my payments and finish faster?
Yes, that's also a common reason. If a pay rise gives you more financial leeway, refinancing with a higher repayment rate can shorten the term and save you interest costs overall.
What happens to my residual debt insurance on the old loan?
If you pay off the old loan, you can usually cancel the associated residual debt insurance. Although you will not receive any premiums already paid back, you will save on future premiums.
