Debt Restructuring: How Does It Work Exactly?

This is how a debt rescheduling works

This is how a debt rescheduling works

  • Saving money: With a debt rescheduling, you can save a lot of money depending on the conditions. Therefore, always take advantage of the possibility of a free and non-binding loan comparison.
  • Increase: A loan can also be rescheduled and at the same time increased in its loan amount. This is particularly worthwhile if you need more money than originally planned.
  • Merge Loans: You may have multiple loans on different terms and conditions. In such a case, you can reschedule these loans to a bank. Not only does it look better, it can also save you some money.

In some cases it can be very useful to reschedule a current loan. Perhaps you get a significantly better offer from another bank or you want to reschedule and increase the loan amount at the same time. In some cases, it can be worthwhile to repay a loan.

But not every loan can be rescheduled so easily. Dedicated loans such as a car loan cannot be rescheduled, or only in certain cases. This is usually not a problem for non-earmarked loans. In the following guide we will inform you about the options for a debt rescheduling. We also take a look at different debt restructuring models and show you how to restructure your loan step by step.

Use loan debt restructuring calculator

Use loan debt restructuring calculator

With our debt rescheduling calculator you can compare your current loan with a new debt rescheduling loan. All you have to do is enter a few details of your previous loan. The calculator now determines your potential savings if you decided to take out a new loan. You immediately see your possible savings in the monthly installment and the loan costs for the entire term.

Example of a debt rescheduling

Example of a debt rescheduling

As you can see in the example below, a debt rescheduling can be very interesting. We assume that you would have taken out a loan of $ 10,000 at an effective APR of 3.9% in January 2019. In this case, your transfer fee would still be $ 8,750 in October 2019. You would now want to reschedule this amount as follows:

As you can see from the example, you would achieve a total saving of $ 1,713 in top conditions at 0.68%. Your rate would also drop from $ 171 to $ 126. However, this is only an example. Which interest rate is offered to you personally can only be determined with a non-binding loan request. It is best to use our free loan comparison or the debt rescheduling calculator.

When does it make sense to repay a loan?

When does it make sense to repay a loan?

In principle, a debt rescheduling is always worthwhile if there is an interesting saving potential with the new loan. That means if you pay visibly low monthly installments and if the loan costs are cheaper overall over the entire term.

A debt rescheduling can also be useful if there is no savings potential, but you may be able to extend the loan term in order to achieve a monthly relief. For example, if you still have a remaining term of 2 years, it would be entirely possible to take out the retraining loan for 3 or more years in order to reduce the monthly rate.

If, on the other hand, you have several loans in progress, you can use a debt rescheduling to reschedule the debt to the individual banks. All you have to do is determine the total cost of the debt at all banks and then apply for a loan of this amount from the new one. It is best to always state that you are planning a debt restructuring so that the bank is informed in advance.

Even with a car loan that is based on the “balloon financing” model and for which you have to pay a due final installment at some point, it can make sense to finance the due final installment with a debt rescheduling loan. For example, you can take out a simple installment loan from a bank and use it to replace the vehicle at the car bank.

The debt rescheduling of a real estate loan

The debt rescheduling of a real estate loan

The debt rescheduling of a real estate loan is usually somewhat more complex and takes place differently than with simple installment loans. First of all you have to wait until the current rate fix ends. This is the time at which you can terminate the real estate loan and reschedule it. Notice of termination must be given at least 3 months in advance.

However, you should try to get follow-up financing in advance and compare the conditions of individual banks with a neutral loan comparison. Because there are huge differences when it comes to interest rates.

First, get a non-binding loan approval from the new bank before you cancel the old loan. As a rule, you support the banks with personal support, since these are usually large amounts of credit. The processing of money is also regulated among the banks.

The debt rescheduling of a car loan

The debt rescheduling of a car loan

A car loan can only be rescheduled in certain cases because it is earmarked. So you cannot simply reschedule the loan, which is mostly financed at one car bank, to another car bank. However, it would be possible to take out a simple installment loan for free use and thus replace the car loan early.

If the car loan is repaid, however, the bank can insist on prepayment penalty. This is basically a compensation fee because you pay off the loan early and the bank earns less as a result. However, the bank may not arbitrarily request this prepayment penalty, but is regulated by law. If the contract is canceled within the last 12 months, the bank may demand a maximum of 0.5% of the remaining debt. If the loan runs longer than 12 months, this rate is a maximum of 1% of the remaining debt.

When rescheduling a car loan, you should therefore calculate precisely whether rescheduling or early redemption is really worthwhile. Debt rescheduling only makes sense if you still have a financial advantage in the matter despite prepayment penalty.

Is a debt rescheduling possible despite Credit Bureau?

Is a debt rescheduling possible despite Credit Bureau?

Credit Bureau plays a very important role in loan debt restructuring. Even if you got your previous loan without any problems, the data in your Credit Bureau may have changed in the meantime. Before you show your previous loan provider the early redemption, you should first check whether the new bank would grant you a loan based on your Credit Bureau.

It is important that you inform the potential new bank that you are planning a debt restructuring. Because the new bank sees in your Credit Bureau that you already have a loan. However, if the bank is informed that you are replacing this loan with the new loan, the risk assessment will be different on the part of the bank.

If debt restructuring is not possible due to a negative Credit Bureau, you still have the option of a personal loan. However, this does not necessarily have to be a person from the private sphere. In the meantime, internet portals have specialized in arranging credit from private to private.

Debt credit and increase at the same time

Debt credit and increase at the same time

Many consumers also owe their credit because they need a little more money than planned. In this case, you can either request an increase from the existing bank or immediately request a new loan to reschedule it from another bank.

Specifically, this would be done by asking your current bank about the terms and conditions for early redemption so that you know the current redemption amount, including the so-called early repayment penalty. If you have these values, you can request the new loan from the other bank and increase the loan amount accordingly by the amount you need.

Overdraft facilities are also often rescheduled and increased at the same time. On the one hand, this serves to first compensate for the minus amount and, at the same time, to build up a buffer on the account so as not to end up in the minus again.

Merge multiple loans into one bank

Merge multiple loans into one bank

If it is the case that you have several loans running at the same time and then mostly on different terms, there is certainly the possibility of repaying the total debt of this loan to only one bank. Such a debt rescheduling or “merger” looks particularly good in the Credit Bureau information, since your credit entries are deleted after they have been settled and after a corresponding period of time and only this new loan remains.

But not only the effect of the Credit Bureau is your advantage. The debt rescheduling of multiple banks into a single bank can also save you a lot of money, especially if you use a cheap online loan. Depending on the conditions, your monthly burden would also be reduced.

To implement such a debt rescheduling, you first have to ask the banks about the terms and conditions of the individual loans. Only then will you know exactly how much money you will need to repay these loans in total. At the same time, you can also use our credit comparison calculator to determine a new, favorable offer.

If a new offer appeals to you and you know the transfer amount of the other loans, you can directly submit a loan request and thus apply for your new loan. However, be sure to instruct the bank that you will be using the loan for the purpose of debt restructuring. As soon as the payment is made there, you can use the money to replace the old loans.

Debt a personal loan

Debt a personal loan

The personal loan from friends or acquaintances is no longer a rarity. But you don’t want to borrow money from friends for too long and it’s best to pay it back as soon as possible. A loan for debt restructuring would also be an option for this.

A good credit rating is, however, a prerequisite for getting a classic installment loan from a bank and thus replacing the personal loan. Certainly there was already a reason why you had previously opted for the personal loan. These were probably also creditworthiness problems. However, if these have now improved and you are now creditworthy again, the debt amount can be rescheduled to a bank.

A classic example of this would be an unemployed person who desperately needs money but is currently not creditworthy for the bank. Then that person could borrow money through a personal loan. As soon as this person takes up an unlimited employment relationship again and becomes creditworthy again, the personal loan can be rescheduled into an installment loan, for example.

Debt credit to the same bank

Debt credit to the same bank

If you want to reschedule your loan with the same bank, this is usually a credit increase. This would mean that the bank increases your loan amount and pays you this difference. Depending on the agreement, either the term is extended or the rates are increased.

What is also very often rescheduled within the bank is the overdraft facility (see: Overdraft facility rescheduling), which arises when you go into the red with your account. This overdraft facility usually has very high interest rates compared to a normal installment loan. If, however, it is foreseeable that the overdraft facility cannot be settled again in a timely manner, then you should ask your bank for a debt rescheduling from an overdraft facility to an installment loan.

What may also happen, but is rather the exception, would be rescheduling at other terms, for example, which is similar to a tariff change, such as in the mobile sector. Here, the bank would replace the current loan and reschedule the debt to a new loan with different terms and conditions. This can be very interesting for the bank, especially if it increases the loan term and, accordingly, interest rates.

How to repay your loan – step by step

How to repay your loan - step by step

  1. Request transfer conditions
    Ask your current bank for the transfer conditions. These usually consist of the sum of the remaining debt and the prepayment penalty due. A short call is usually enough and the documents will be sent to you.
  2. Request a debt rescheduling loan
    Use the possibility of our free loan comparison or our debt rescheduling calculator to find a cheap loan offer. To do this, enter the amount of the transfer fee or a little more for the loan amount, choose a term and the debt rescheduling as purpose. You will then receive an overview of the possible conditions and can also directly start a credit request.
  3. Wait for payment and redeem old loan
    As soon as the new bank has paid the loan amount to your account, you can directly replace the old loan. In most cases, those of the new bank must also prove that the old loan has been repaid, insofar as it is a loan with the purpose of rescheduling. If you have decided on a consumer loan, for example, you would not necessarily have to replace the old loan, as this is not a condition.