Consolidating and refinancing multiple loans: A strategic guide to financial relief
28.05.2025
10
Minutes
Katrin Straub
Managing Director at nextsure
Are you losing track of various instalments and high interest payments on several loans? Debt restructuring can turn many small burdens into a single, manageable instalment and reorganise your finances. This guide shows you in three steps how to regain control of your finances.
The topic in brief and concise terms
By consolidating several loans, you can reduce your monthly instalment and save up to 30 per cent in interest costs.
Debt consolidation gives you a better overview with just one monthly instalment and can improve your SCHUFA score in the medium term.
The costs of refinancing (early repayment compensation) for instalment loans are capped by law at a maximum of one per cent of the outstanding balance.
Precisely analyse the financial burden caused by multiple loans
Having several loans often means more than just losing track of them. An overdraft at twelve per cent interest and a consumer loan at eight per cent interest can quickly add up to an expensive combination. With a combined debt of EUR 10,000, annual interest costs can easily exceed EUR 1,000. Many underestimate that even small loans can have a negative impact on creditworthiness. A precise list of all liabilities is the first step towards financial clarity and the basis for a clear financial overview through debt consolidation. This analysis often shows savings potential of up to 30 per cent in interest costs. This creates a solid foundation for the next steps in optimising your finances.
Implement refinancing in four practical steps
A structured process is crucial for successfully consolidating your loans. With these four steps, you will reach your goal:
Determine the total debt: List all loans with remaining debt, interest rate and monthly instalment. Add up the remaining debts to determine the new loan amount required, which is often around an average of 15,000 euros.
Compare loan offers: Obtain offers for a refinancing loan in the amount of the total debt. Pay attention to the effective annual interest rate, which includes all costs and should often be two to three percentage points below your old contracts.
Check early repayment charges: Clarify with your old banks whether a fee is charged for early repayment. For personal loans, this is legally capped at a maximum of one per cent of the remaining debt.
Take out the new loan and pay off the old debts: Once the new loan has been approved, the new bank transfers the amount directly to the old creditors or to your account. This settles all old loans in a single transaction.
This process usually takes between seven and 14 working days. Careful preparation in the first two steps is crucial to success.
Illustrate potential savings using an example calculation
The theory of debt refinancing is easiest to understand with a concrete calculation example. Let’s assume you have two loans:
An overdraft facility of EUR 3,000 at 13 per cent interest (monthly interest charge: EUR 32.50).
An instalment loan with a remaining balance of EUR 7,000 at nine per cent interest (monthly instalment: EUR 250).
Your total monthly burden is therefore more than EUR 282. You combine both debts into a new instalment loan of EUR 10,000 with an effective annual interest rate of five per cent and a term of 48 months. Your new monthly instalment is then only around EUR 230. This is a direct monthly saving of more than EUR 50. Over the full term, you save more than EUR 2,400 in interest costs. A more affordable instalment loan thus replaces expensive old debts and immediately creates financial breathing room.
Successfully meet the requirements for a debt consolidation loan
Banks check the same criteria for refinancing as for any other loan. A stable income is the most important requirement, with a permanent employment contract after the probation period being ideal. You must also be of legal age and have your main residence in Germany. A clean SCHUFA report is also crucial; a score of over 95 per cent is considered good. A detailed household budget calculation can significantly improve your chances. If you correctly prepare a household budget calculation for the loan application, you show the bank that you can comfortably afford the new, lower instalment. This reduces the risk for the bank and can lead to a quicker approval.
Sustainably improve creditworthiness through strategic loan consolidation
Debt restructuring is more than just a short-term saving trick; it is a strategic tool for financial housekeeping. Credit bureaus such as SCHUFA view it positively when a borrower services just a single liability instead of many small loans. Reducing the number of creditors signals better financial organisation and can improve your SCHUFA score by up to ten points in the medium term. Our expert tip: Check your free SCHUFA data copy once a year for outdated or incorrect entries. Cleaning these up before applying for debt restructuring can further improve your terms. This way, you can use debt restructuring to improve your creditworthiness and secure more favourable financing options in the long term.
Secure optimal contract drafting for maximum flexibility
The new loan agreement should not only stand out for a low interest rate. Look for flexible repayment options that will help you in the long term. One important clause concerns free overpayments. The option to make additional repayments of up to five per cent of the loan amount once a year can shorten the term by more than twelve months. Early payment breaks of one to two months per year should also be possible without additional costs. Check whether the agreement allows early full repayment without high costs. A long-term loan does reduce the instalment, but flexible repayment options can be adapted to your financial situation. This flexibility gives you control, helping you become debt-free more quickly when your financial situation improves.
Not every financial situation is the same. Sometimes a negative SCHUFA entry poses a particular hurdle. Nevertheless, refinancing despite a negative SCHUFA is not impossible. Specialised providers assess the risk differently and often take collateral such as a vehicle or property into their decision. Interest rates here can be two to four percentage points higher, but are often still cheaper than those of an overdrawn overdraft facility. Refinancing credit card debts, which often carry interest rates of over 15 per cent, also offers enormous potential for savings. What is important here is to approach the process transparently and honestly. Open communication about your financial situation increases the chances of a successful restructuring of your debts. This means that even in difficult cases, a solution can be found.
Conclusion: Regaining financial sovereignty through smart refinancing
Combining several loans is an effective lever for optimising your finances. You can reduce your monthly burden by up to 20 per cent and often save several thousand euros in interest over the term. At the same time, with just one repayment and one point of contact, you regain full control. Improved creditworthiness is another positive side effect, making future financing easier. The process requires careful planning of around three to five hours, but the long-term benefits are significant. Take the opportunity to actively shape your financial future. Request your individual risk analysis now: Have your insurance situation checked free of charge and receive specific recommendations for improvement.
More useful links
The Federal Statistical Office (Destatis) provides detailed tables and data on the average debt of private households in Germany.
The German Bundesbank provides comprehensive statistics on interest rates and yields for consumer credit to private households, particularly instalment loans.
The Consumer Advice Centre provides information on loans and borrowings and gives practical tips on how you can save money when borrowing.
The Ifo Institute offers a scientific study on insolvency law, which highlights relevant aspects of debt restructuring.
The DIW Berlin publishes a weekly report that analyses household over-indebtedness in the context of income expectations and lending.
The Federal Working Group on Debt Advice (BAG-SB) is the central point of contact for information and support on debt counselling.
The Federal Ministry of Justice provides the legal text of Section 491 of the German Civil Code via “Laws on the Internet”, which regulates the general provisions for consumer loan agreements.
FAQ
What are the main advantages of consolidating my loans?
The three biggest advantages are: 1. Lower costs thanks to a lower interest rate. 2. Better clarity and planning with just one monthly instalment. 3. A potentially better credit rating with credit reference agencies such as SCHUFA, as you have fewer creditors.
What documents do I need for refinancing?
As a rule, you need the last three payslips, your bank statements for the last three months, a copy of your identity card, as well as the loan agreements or settlement statements for your existing loans, which show the exact outstanding balance.
How much is the early repayment charge?
For instalment loans or consumer loans, the amount is regulated by law. It may not exceed one per cent of the outstanding debt to be repaid. If the loan has a remaining term of less than one year, the fee drops to 0.5 per cent.
Will the bank handle the refinancing for me?
Many banks offer a switching service. This means the new bank contacts your old creditors, asks for the exact outstanding balance and arranges the repayment directly for you. This makes the process much easier.
Can I also refinance an overdraft?
Yes, refinancing an expensive overdraft into a cheaper instalment loan is particularly sensible. Overdraft interest rates are often above twelve per cent, whereas an instalment loan can already be had for under five per cent, which leads to significant savings.
What happens to my residual debt insurance?
If you pay off an existing loan with outstanding balance insurance, you can cancel this insurance. You will then receive a pro rata refund of the unused insurance premiums, which further reduces your overall costs.
