Debt restructuring is used to combine expensive existing loans with a cheap loan. Usually, the number of existing contractual partners decreases with the borrowing for a debt rescheduling, which, however, is not a noteworthy advantage in itself, since the payment of the loan installments is usually made by direct debit and does not cause any work or costs. Since the borrowing rates for new loans have dropped regularly in recent years, rescheduling older loans makes sense in many cases.
Which loans are included in the debt restructuring?
A cheap loan for debt restructuring serves to replace most of the existing loan liabilities. Loans that were granted on particularly favorable terms are not included in the measure. Above all, this includes real estate loans and vehicle loans, but installment payment agreements with mail order companies and brick-and-mortar stores are often made at particularly favorable conditions or free of interest.
However, credit lines that are used are included in the debt restructuring on the current account and on the credit card account, since particularly high interest rates are charged for the overdraft facility and the credit card facility.
What to consider with debt rescheduling loans
Borrowers only apply for the pooling of loans if a cheap debt for debt restructuring actually leads to savings. When calculating the cost savings from the planned rescheduling, debtors take into account not only the interest on the new loan but also any prepayment penalties that may have to be paid to their previous lenders.
In a few exceptional cases, a cheap debt rescheduling loan also makes sense without saving money. This only applies if the borrower absolutely has to reduce his monthly burden from the loan installments and the previous partner banks have rejected an application.
A cheap loan for debt restructuring is practically processed in such a way that the borrower sends the new bank a list of the debts to be paid and at the same time authorizes them to transfer the debt rescheduling loan to the accounts of the previous lenders.
This procedure is necessary so that the credit institution responsible for the rescheduling knows that the borrower is not taking out an alleged debt rescheduling loan as a new loan and may therefore no longer be able to meet its obligations.
Maintain discipline after debt restructuring
A cheap loan for a debt rescheduling does not automatically reduce the overdraft facility on the checking account or any other credit line such as that of the credit card account. Thus, the recipient of a corresponding loan must maintain discipline after the debt rescheduling so that he does not accumulate a costly negative balance on the checking account or credit card account shortly after the successful measure.
An active reduction of the discount range by the account holder is possible at any time, but is rarely required to ensure solvency in the event of unforeseeable expenses.