Are you considering to repay existing credit or to increase an installment loan? High debts, necessary reorganization of finances, debt relief and recovery of financial leeway to pay credit with credit, can solve problems.
It is not easy, however, to organize the financial restart properly. Redeeming credit as well as increasing credit can be beneficial or advance to the rank of borrower. In the article we present you the credit increase and rescheduling in details.
Find out what matters and who to turn to for your financial reboot to achieve all of your goals. Authentic data help you to follow the individual “royal road”.
The most important thing in keywords:
- Refinancing does not equate consumer credit and mortgage loan
- Remortgage and credit differentiate
- Consider credit hurdles, consider debt restructuring
- Making use of individual advantages, topping up is often easier
- Always invest short-term loans in the refinancing
- Implement difficult debt restructuring with professional help
- Credit comparison – balance to your own advantage
- Make loan application completely online – save interest and time
- Debt rescheduling on regular loan, despite poor credit rating, is possible
- credit bureau foreign credit, good customers may increase
Loans – Demand in Germany
The citizen makes big purchases on credit. Above all, low key interest rates fuel the willingness to invest in real estate. From a veritable real estate boom, which will lead to numerous debt restructuring in the coming years, speaks the financial world.
At the same time, the rate of consumer credit for investments is rising “with and without” earmarking. Low consumer interest rates encourage consumption on credit. Some loan offers are even lower than the current inflation rate.
To buy today on credit means to pay less, than to save the necessary capital before purchase. Many consumers are responding to the trend. From 2015 to 2016, consumer loans grew from 176.4 billion in December 2015 to 183.7 billion in December 2016.
Debt rescheduling and credit – terms explained briefly
Debt rescheduling means the settlement of an existing debt through credit. Deviating from the definition of “a” debt, the language usage implies the balancing of an existing loan with another, newly taken up loan. Debt rescheduling also states that not only existing debts would be combined, but an overall higher loan amount would be taken.
Credit increase refers to the increase in the loan amount of a current loan. Common usage reduces “increase” to the increase of an existing installment loan, although the economic importance is far more meaningful. The remaining debt increases by the top-up amount for the new loan amount.
In the traditional interpretation of the term, the old credit conditions are preserved. To illustrate: A traditional supplier credit, which was increased for a particularly large order or a permanent disposition extension. On the other hand, it would be possible to re-agree on all credit terms.
Credit increase and rescheduling are terms with large overlaps in content. In linguistic usage often blurs that they are different credit products.
Examples of differences – rescheduling and topping up
A rescheduling of current loans, provided adequate credit, is always possible. Despite having a sufficiently good credit rating, the credit increase does not offer every credit institution.
A rescheduling always refers to the settlement of an existing debt through credit. On an increase that applies only to a limited extent.
The existing debt (in the minimal version) is not balanced. Existing credit is only supplemented by additional loan volume, without first repaying the old debt. ( Name example: permanent increase of the overdraft facility).
Credit tip – debt rescheduling or credit increase Whether a credit increase or a rescheduling are recommended, opens up only on the condition comparison.
The rescheduling offers greater scope for comparison, since different providers are eligible for the rescheduling loan. A credit increase excludes the provider change.
Thus, automatically only the conditions apply, to which the provider of the old loan is ready to finance the credit increase.
Financing – real estate and consumer credit
Reorganizing existing liabilities, adapting them to current requirements, taking advantage of them is equally an objective for rescheduling real estate loans and consumer credit. Under the best possible conditions, complete debt relief is the top priority in both cases.
Real estate financing – planned debt restructuring
Real estate loans take borrowers for very long periods of time. (20 years or 30 years to repay). As a rule, they owe at least once in the course of the repayment, mostly even several times. Expired fixed interest periods as well as the financing structure suggest the rescheduling. Typical of classic home finance, for example, would be to “save the credit”.
A Bauspar contract is due during the repayment period, a savings contract or insurance benefit is payable. This money is used for debt repayment. A parallel rescheduling makes it possible to use interest-saving effects.
Secure interest early – successful real estate debt
If the property interest falls, but it is not time to reschedule, real estate owners do not have to miss the opportunity. Through forward loans, borrowers secure favorable interest rates at an early stage without having to call up the loan immediately.
Forward loans are considered an important part of the long-term planned debt restructuring or follow-up financing of the real estate loan in order to maximize interest rate savings.
Save interest at no extra cost
At the same time, long-term planning means avoiding prepayment penalties as much as possible. At predetermined deadlines, the real estate owner may – without compensation for damages – reorientate.
Potential interest savings, for example, through a cheaper offer or a higher-level credit protection, the borrower does not have to share with the former financier. In order not to lose good customers, the “old financiers” often offer follow-up financing at preferential rates.
Reorganize existing consumer debt
At first glance, there is no difference between real estate loans and other debt rescheduling loans. In both cases, credit is paid with credit. Only looking at the details explains that they are not identical credit requests. Rescheduling of existing installment loans and other liabilities through consumption, do not pursue a long-term planned loan scheme.
For payment obligations from consumption, no debtor follows a “master plan” that creates sustainable values. For rescheduling or credit increase, borrowers decide relatively spontaneously. Instead of long-term credit planning, “event pressure” leads to the reorganization of finances. External influences, for example, the dispensing takes over, point the way.
Taking differences into account – recognizing credit hurdles
Real estate debt restructuring:
The rescheduling of a real estate loan does not occur under normal circumstances until it has already been repaid over five or ten years. Within this time, the resale value of the property usually increases. At the same time, repayments noticeably reduced the remaining balance. From a credit assessment perspective, creditworthiness is gained at both levels.
For the rescheduling loan of the real estate purchaser arise from the reduction of the loan amount and increased tangible value, best Umschulduns requirements. The debtor willing to repay will easily receive various advantageous financing offers. Its increased credit rating has a positive effect – saving costs – on future financing interest.
Why is creditworthiness rising?
A smaller amount of credit for the debt rescheduling loan is offset by a presumably increased resale value of the Reinsurance. The credit history also proves that the borrower has certainly been able to meet its obligations in the past. Typical fixed interest periods – 5 years or 10 years – allow foreign banks to recognize that this is not a “debt restructuring”.
Rating of the bank:
Overall, the refinancing of old debts, possibly a loan extension, is a very secure loan option. The rescheduling is easily approved.
To redeem consumer loans
The situation is different when consumer loans are to be repatriated. In the case of the consolidation of existing installment loans, not enough time has passed to exceed the fixed interest period. (Usually, the interest is fixed for the entire term). This results in disadvantages for the rescheduling.
Prepayment penalties make debt restructuring significantly more expensive. One percent of the balance, if the remaining term exceeds 12 months, may be charged to credit institutions as damages. For residual terms of less than one year, the bank may still settle 0.5 percent of the remaining debt as damages.
Credit rating – differences:
Unlike the case of securing a house or a condominium, the value of security is reduced. (Example car loan debt). If Dispo is rescheduled, there is no real value behind the loan request that could secure the loan. Only the personal creditworthiness of the borrower protects the debt. Increasing the credit rating only affects the already paid out repayment.
The chance of getting closer to the primary goal of debt relief by means of a low-interest rescheduling relies heavily on personal creditworthiness. The creditworthiness alone decides on credit opportunities and the realizable interest rate.
It is not supported by capital appreciation, as no appreciation of value results from already consumed (used up) money. On top of that, premature loan repayment leads to further costs.
Credits tip – deliberately reconsidered From the diversity of credit valuation, potential credit constraints for debt rescheduling of consumer credit are derived.
It is all the more important not to rush. A rescheduling is only to be recommended if rescheduling advantages predominate and the primary objective of the debt relief is not far off.
Advantages and disadvantages – loan debt to third-party bank
The biggest advantage of being able to reclassify independently arises from the comparability of credit offers from independent credit institutions. The competition for solvent borrowers has a noticeable effect on the financing costs and other credit terms. On average good creditworthiness can be saved by the loan debt, after careful credit comparison, significantly save money.
The rescheduling of a foreign bank can also have an advantageous effect if special conditions such as free special repayment in any amount are enticed. Special repayment options make it possible, in spite of low installments, to repay an appropriate amount (in addition). New maturities adjust the rescheduling loan to the actual financial performance.
The disadvantage of rescheduling a foreign lender is that there is still no individual relationship of trust. The credit experience is missing. Without any personal experience with the borrower loan approval and interest rate offer based on external data. The credit bureau score is given a higher weight than the credit increase.
Pros and cons – credit increase
An advantage of the credit increase is the mutual credit experience. The longer the cooperation went smoothly in the past, the greater the advance of trust for the desired credit increase. Having a good credit forecast, outside the credit bureau data, can positively impact the entire loan process and save on financing costs.
A credit decision based on accumulated credit experience can be made faster than lending to unknown persons. Despite weaker scores, a loan to a good existing customer can be considered safe. Any special interest rate conditions that could not be expected due to the credit bureau score alone could reduce the top-up credit.
The disadvantage is the bondage to a specific lender. Not every bank grants the right to free special repayment or, in case of early loan repayment, waives any compensation. If there were minor problems in the past, a credit increase can be denied, even though another credit institution offers a rescheduling option based on the credit bureau credit rating.
|Can be used for||increase||debt restructuring|
|longer term for||usually yes||Yes|
|Change to cheaper provider||No||Yes|
|Take on loan terms||often yes||No|
|prepayment penalty||usually no||often yes|
|Credit experience with each other||Yes||usually no|
|Best interest rate||usually no||Yes|
|flexible credit volume||Yes||Yes|
Preparation for rescheduling or credit increase
Negligence leads to avoidable hardships and probably expansive financing costs. “Only take credit if it is unavoidable. Always repay debt quickly, “is considered a” golden rule “. In addition, the following applies to a debt repayment or reimbursement: “Prepare yourself for rescheduling or reopening even more intensively than on ordinary loan requests”.
With a reorganization of the finances numerous positive effects can arise, if the refinancing was prepared in detail. Mistakes in planning, however, lead faster to a debt spiral than an ill-considered installment purchase or an overdrawn issue could. Faltering in old contracts, higher interest rates due to reduced creditworthiness, make unplanned debt restructuring more tangible.
Credit tip – plan carefully Not every single debt is equally reasonable to repatriate. Check old contracts not only by asking for the remaining debt, before you decide to refinance.
From the very beginning it is clear that the Dispo is on the debt restructuring plan. Any regular installment loan is cheaper, leads faster to real debt, as saving efforts against the red numbers in the checking account.
Which liabilities must each refinancing cover?
Short-term loans, which include check-in, credit card and external short-term credit, are extremely expensive. The generic term “short-term credit” is to be taken literally. About half of all Germans regularly use their disposition limits in the salary account. The other half is either granted no overdraft margin or runs the current account cost basically in the balance.
With an average of 3,000 euros, Germany’s statistical “account overdrafts” are permanently in the red. Most of them do not manage – by saving – to get consistently into the credit. The overdraft becomes a permanent charge. At 11.5 percent effective interest, the overdraft of 3000 euros costs about 345 euros interest a year. In addition, there may be further noticeable burdens on the overdraft limit.
Be it 10 euros for a return debit + dunning fees or up to 20 percent effective interest rates for the dispo. A rescheduling on a installment loan immediately reduces the costs. To save borrowers without the risk of damages for quick loan repayment or other additional costs.
To summarize installment loans – what should be considered?
Repaying or increasing existing installment loans can increase financing costs. In principle, the legislature grants the right to replace existing installment credits prematurely. Interest already paid in the loan amount is fully reimbursed by credit institutions. – Except for their due early repayment penalty.
It is calculated if in the old contract “free loan repayment” was not expressly agreed. If a risk insurance has been taken out for the loan, the insurance premiums are usually fully included in the financing amount when the loan is closed. A recalculation of unused contributions or a transfer of the insurance cover is excluded even with a credit increase.
From about 10 percent to 30 percent of the remaining debt corresponds to the proportion of unused, “lost” residual debt insurance. At this point, only the calculator can clarify whether a premature loan repayment still pays off. In most cases, the value of the contribution loss significantly exceeds the value of potential interest savings. Apparent benefits of refinancing turn into disadvantages.
With a tight budget, the goal of debt restructuring is to regain financial leeway. Basically, this possibility arises because the maturity of the rescheduling is re-agreed. A longer term reduces the monthly installments and relieves the budget. Nevertheless, economic aspects – explicitly the financing costs as a whole – should not be ignored.
To-do list debt rescheduling or topping up
|Take old contracts to hand|
|Check remaining time|
|Payment protection insurance|
|Check interest rate|
|Check special conditions|
|Request transfer fee|
Request transfer fees – pursue objectives
It is important for every successful calculation of refinancing to work with realistic numbers. Please do not just estimate the transfer fees grossly, but ask explicitly for the planned rescheduling date. In most cases, a comprehensive debt restructuring will be a compromise between cost-effectiveness and pressure to act. Nevertheless, a rescheduling has to bottom out.
A successful rescheduling always leads to:
- Manageable, economically justifiable financing costs
- A balanced household budget (not over or under-challenged)
- An appropriate maturity (primary goal debt relief)
- Portable rates with noticeably efficient eradication
- Monthly installments that allow you to save (no investment backlog)
- The preservation of financial leeway (to survive emergency situations without additional credit)
- To achieve short-term, medium-term and long-term individual goals
It is easy to reconcile all these objectives, but it is not easy to restructure. Refinancing becomes really complicated if a portable loan restructuring is to relax a difficult financial situation. Solving difficult cases on one’s own initiative often leads to the failure of the financial rescue operation.
Help with difficult rescheduling
There is no scheme “F” for the successful rescheduling in difficult cases or successful patented recipes. Each refinancing must be tailored to the individual circumstances, otherwise the rescheduling success is endangered. Borrowers can not hope for a “second attempt” in difficult rescheduling. Mistakes can not be easily compensated.
No money and no idea how to go on
In difficult questions, good advice must not be expensive. In a difficult situation people want to repay their household budget does not allow additional expenses. An appointment with the non-profit debtor advisor does not cost a cent. Nevertheless, with the debt counselor a selected professional is ready to help. He or she works on the individual case and makes suggestions on how to build up the successful rescheduling.
In futile situations, the Schuldnerberatungsstelle advises private insolvency. From a calculable debt level, each refinance only adds more to the debt. Non-profit debt advice centers are guaranteed to provide independent and exclusive advice in the interest of the debtor. The payment of the consultant does not depend on the outcome of the procedure. The taxpayer bears the costs.
Non-profit debt counseling – likelihood of confusion
Similar to a non-profit debt counseling sounding offers on the net can come from credit intermediaries, “debt restructuring” and lawyers. Lawyers are certainly offering high quality advice. Only the costs can usually afford private debtors.
Credit intermediaries, once provided that it is not a “scam”, must also either charge a fee or can not provide neutral advice. – Everyone has to live off his income. How high the quality of advice actually is, varies significantly.
Neutrality of the credit intermediary, with free accompaniment of debt restructuring, is lost. The credit intermediary in this case relies on the success fee. Whether the brokered loan actually offers the optimal solution or a conflict of interest remains hidden.
Credit tip – accept help In principle, we recommend that you use free, neutral offers of help when rescheduling in a difficult starting position. Valuable individual advice from nonprofit debt counselor protects against plunging into a financial adventure.
Find rescheduling loan – Credit comparison
Once a year everyone has the right to receive a free self-assessment from the credit bureau. Based on the score given there, the search begins at the appropriate debt rescheduling loan.
If a good credit rating continues to be attested despite existing liabilities, regular installment loans are eligible. To find the individually matching credit, contribute to the credit comparison calculator.
|credit rating||Likelihood of loan default|
|100 – 149||0.00 – 0.19%|
|150 – 199||0.20 – 0.54%|
|200 – 249||0.55 – 1.54%|
|300 – 349||1.55 – 4.92%|
|350 – 499||4.93 – 14.23%|
Three mouse clicks (loan amount, term, purpose) are sufficient for a list of offers to appear on the screen. The representative example provides for the comparability of credit-based interest rates. It shows the interest rate that two thirds of borrowers receive from the provider. A non-binding credit check clarifies whether the loan request fits into the budget.
Only through the application submitted online, without establishing the legal obligation by an ID check, there is no credit agreement. The automatic credit check is therefore a good means to limit your own credit opportunities without obligation. At the same time, credit comparisons offer an uncomplicated overview of the special conditions offered.
Important special conditions would be:
- Condition query for binding credit check
- Free early loan repayment
- Free special repayment several times a year in any amount
Useful as well:
- Extended right of withdrawal
- Once a year, a payment break if necessary
- Credit increase on equal terms
Credit tip – Apply for debt repayment loan properly
A debt rescheduling loan is applied for as well as any ordinary installment loan. Detailed information on the loan application can be found here.
Application and credit check for loan repayment
Rescheduling loans generally correspond to a standard installment loan. In Germany, contractual freedom applies to credit agreements. Theoretically, the terms and conditions of the application may formulate any claims on the granting of credit, as long as the applicable law is not violated. The specifications are generally based on the required credit security.
Basically, banks and savings banks are only allowed to lend money if lending is considered safe by accepted standards. The basis for secure lending creates income from dependent social insurance. Most banks demand a permanent employment contract outside the probationary period.
As proof of income serves the payroll, which also shows all other important data. In addition, the bank statements can be required, up to three months retroactively to estimate the financial position of the borrower more accurately.
In addition to the positive revenue and expenditure account, the attachable income share and credit bureau’s credit rating also determine lending.
Usually to submit:
- The signed completed loan application
- One to three current payrolls
- Consent to the credit bureau clause
- Possibly more evidence according to the application description
The borrower may apply for the debt repayment loan only personally. Each borrower must prove his identity when making the application. For identity verification, direct banks offer various options:
- ID check in the store (only with online active chain stores)
- ID check using the classic post-ID procedure at the post office counter
- ID check by video ID (online ID check in video call)
Credit advice – Debt rescheduling in 48 hours A rescheduling can be under time pressure, for example, if the house bank remotely dunpo the reminder. Upon reaching the dispolimit debits threatened “lack of coverage” to fail.
Debt rescheduling despite chargeback is significantly more expensive and harder to obtain than regular credit. Advance loan for rescheduling can provide the account balance within 48 hours, after legally binding application.
With Video-Ident online credit remains in the fast lane of the information superhighway.
How is the debt repayment loan paid?
The payout bank usually transfers the rescheduling loan to the current account of the borrower. The borrower himself arranges all payments to balance existing loans and other liabilities.
Nevertheless, the credit landscape in Germany is no longer a “service waste”. Similar to the current account transfer service, the settlement of existing liabilities can also be arranged by the lender.
Whether the selected debt rescheduling loan offers this special condition for loan disbursement is not uniformly regulated.
Car loan repayment – special features
Buying a car is a frequent reason for rescheduling. Only a few car buyers keep new vehicles until they are fully paid. Many young, not yet paid cars takes the dealer in the new purchase in payment. But with a classic rescheduling the vehicle exchange has little in common.
It is not credit with credit offset, but the repurchase value of the vehicle compensates for the existing car loan. If the merchant purchase price is insufficient to compensate for the loan, the holder has to pay. In the next step, the bank finances the new acquisition.
The new loan is not directly related to the old loan. It is therefore not a debt restructuring or credit increase, but “only” an early loan repayment, after which, a new loan is agreed.
Car loan – finance balloon rate
Many high-quality vehicles finance car buyers with small current installment payments. At the end of the term, a large balloon rate follows up to the extent of the estimated residual value. Low-risk is the further financing if a two-way financing was agreed when buying. In this case, the Kotsibank guarantees the re-financing of the balloon rate. Only the interest conditions are not fixed yet.
Without the further financing guarantee, car buyers are often faced with a debt restructuring problem when the balloon rate is due. The Kotsibank is expected to reject a renewed funding. A loan remittance to another provider is also not easy with a weak credit rating. The material value of the vehicle is often insufficient to secure the loan.
Due to the small current installments only the depreciation was taken into account, including the down payment. The real value corresponds approximately to the balloon rate, but not to the mortgage lending value. (Mortgage lending value = 60 – 80% of the estimated value). Under these circumstances, only the personal credit rating secures the difference to the required debt rescheduling loan.
Credit tip – Car financing with poor credit rating Balloon credits are very seductive due to their low running rates. With little financial flexibility, this type of financing is strongly discouraged. A classic installment loan, with consistent installments to the end, bypasses the problem.
At the very least, borrowers who finance a vehicle at its credit limit should insist on guaranteed follow-up financing. The guarantee does not make the high balloon rate a debt restructuring problem.
Advance loan for rescheduling can provide the account balance within 48 hours, after legally binding application. With Video-Ident online credit remains in the fast lane of the information superhighway.
Debt Restructuring in Crisis Mode – Financial Economy in Transition
Since 2008, the financial industry has been regularly in the focus of the media. Every few years, the euro is saved. Again and again, European banks get into trouble. They are saved via parachutes – directly and indirectly with taxpayers’ money. The normal citizen reads such news. For everyday life, “normal consumers” usually notice no drastic changes.
Statistics calculate a fortune of 83,000 euros per German citizen. The CB’s interest rate policy is complaining loudly. Savings do not generate income, but lose purchasing power – that’s the message of horror. Many workers can only smile about it. Affected is at most the compulsory saving for the pension.