Lately you have heard more and more that you should reschedule your loans, but does that really make sense? Of course, there is also the question of what exactly debt rescheduling is and how it can help.
One can easily explain the debt rescheduling. The lender is simply changed and money can be saved. The interest rate level of the loan is therefore kept as low as possible. Debt restructuring can be very useful, especially for bank customers, because interest rates are extremely high. In this case, debt rescheduling is a good option and reduces costs.
When is debt restructuring useful?
Debt rescheduling is the replacement of the current loan with a new loan. At first that sounds pretty complicated, but it is actually very simple. This measure will pay off especially for borrowers if the new interest rate is significantly lower than the previous interest rate.
The greater the difference between the old and new loan, the greater the savings on debt restructuring. As a rule of thumb, you can remember: the greater the remaining debt and term of the loan, the more worthwhile it is to reschedule the old loan to a new provider. Debt rescheduling can also be useful if you have multiple small loans and want to combine them into one large loan. In the same way, rescheduling is advantageous if your own overdraft facility is used permanently, but the overdraft facility interest is higher than the interest on the installment loan.
Debt Loans – A Small Example
The debt rescheduling will definitely pay off. Here is a small example. If a consumer took out a loan of $ 10,000 with an effective annual interest rate of 9.0 percent and a term of 60 months in 2012, you can carry out a debt rescheduling. With new financing, a residual debt of 5.5 percent and savings of up to 238 dollars are possible. Interest savings are even greater if the loan has a larger amount. So if you took out a loan of 20,000 dollars two years ago, the current interest rate will be replaced by an effective interest rate of 5.5 percent. Thus, the interest payments are reduced by an impressive 496 dollars.
How does debt rescheduling work?
If you already have a loan, you should check the current interest rate. It is equally important whether the interest rate is variable or fixed. In general, variable interest rates adjust independently in the event of changes. This is not the case with a fixed interest rate. Borrowers with fixed-rate agreements should therefore contact their house bank and negotiate with it. In some cases you can achieve better conditions without having to repay loans.
You must also keep an eye on the deadline for rescheduling. In principle, current loans can be canceled at any time after a three-month notice period. However, the earliest date is six months after the loan has been paid out. When changing to a new bank, the new bank usually takes out the termination of the old loan. If this is not the case, you have to take over the termination yourself. Simply inform in advance whether the new bank would carry out the termination.
When is debt restructuring not a solution?
Of course, rescheduling can help in many areas, but this is not always a good option. If you are already completely overwhelmed with the current loan or the respective loan has even been canceled or due, then rescheduling does not make much sense anymore, Also, rescheduling will not help you if you already have a negative Schufa entry. Often, you will then no longer be granted any loans and therefore you will not be able to use the services.