Loan consolidation: Requirements, calculator and key facts

Between current installment credits, credit lines and debts with the credit card company, consumers can quickly lose track of things. In addition, they run the risk of paying the above-mentioned liabilities too much for the claimed credit lines. For example, anyone who uses a payment system and the credit card’s availability frame always accepts an above-average lending rate.

Often out of sheer convenience, as the high effective loan rates for these products are well known. A debt consolidation is the right way to reduce such debt. In addition, debt consolidation measures are also a good way for many borrowers to reduce current loan costs. First, we would like to explain at this point what exactly a debt consolidation is.

Debt consolidation is the replacement and replacement of old financial liabilities by a new, most favorable credit option. Many banks deliberately promote their loans in this context because they know about the huge demand on the consumer side.

Not every bank helps with debt consolidation

Our first tip for people who would like to repay is the compliance with the purpose of using online credit comparison. For one thing, these customers are not welcome at all banks, even though the agency portals are increasingly recognizing the need. On the other hand, the purpose of ” debt consolidation ” is important because the financial burdens in this context usually less significant. If you are already paying interest on two or more loans at the moment you apply, you can expect a rejection of the application without the consolidation notice.

Since the old loans are being replaced as part of a consolidation, the existing liabilities are assessed differently when examining an application. Meanwhile, the majority of classic installment loans without earmarking can also be used for debt consolidation.

Woman reflects on debt restructuring

The higher the loan amount, the higher possible “transfer fees”

Whether a consolidation actually pays, depends mainly on the amount of prepayment penalty. It is a quite common charge factor. Banks and credit institutions will use these charges to compensate for the loss of revenue, if loan exchangers prematurely repay a loan and use the funds from the debt consolidation financing for this purpose. The typical charge for German credit providers is 1.00% of the remaining debt. In the example of a loan with a volume of 20,000 euros, the fee is therefore 200 euros. If a construction or real estate financing in the six-digit range is replaced, the additional costs are correspondingly higher. In order to make the consolidation really worthwhile, the savings from the consolidation of the cheaper effective loan rate should be correspondingly high, so that the total costs after the change are actually lower.

Although the prepayment penalty might not always deserve the suffix “Kostenfalle” in every case; Nevertheless, the future lending rate should be noticeably below the previous one, so that the compensation of the higher additional fees is crowned with success. Positive in the credit comparison, but on the fact that there are now banks that give up completely on a prepayment penalty.

Attention: Whether premature early repayment and consolidation is possible, borrowers take best before the first offer queries the credit agreement. Alternatively, you can contact Customer Service.

Good loan calculators facilitate the planning work

What has of course a top priority in the case of a normal installment loan , must also be taken into account in the case of debt repayment, the interest. With a loan calculator the comparison is quick and clear. In addition, this has the advantage that you also find some offers in the overview that you might have overlooked. For example, this sometimes happens with financing from smaller regional institutions that do not have an office at your location.

Internet loans make consolidation “easier”

In many cases, the company cooperates with various banks through which “Umschulder” some interest rebates on can secure promotions. The early planning of debt consolidation is particularly important in this case. Because the actions are often limited in time, so new borrowers should be fast in order to take advantage of the special conditions.

Redemption amount crucial

In this scenario, planning also includes the consideration of appropriate credit rates. If the current lender does not allow for retrospective adjustments to the monthly installments, consolidation is often the ideal approach to adjusting repayment to changes in financial circumstances. This applies equally to an improvement, such as a possible deterioration in income. If the income of a borrower has risen since the loan was taken out, higher rates can do two things:

  1. a faster eradication
  2. a reduction or the repayment term

Anyone who has recently realized that the burdens on the changed income were too high, can also plan reductions in the monthly installment as well as an extension of the term as part of a consolidation – quite apart from the option to obtain additional capital beyond the outstanding debt. If you are currently paying off more than one old loan, in many cases you will not be able to adjust all your loans. If only credit corrections are ruled out, borrowers will quickly face a serious problem.

Reading tip: Guide article on taking credit

Creditworthiness of debt consolidation

As with the application for a first financing, creditworthiness also plays an important role in debt consolidation. What this means is that interim negative entries in the Schufa register (which is the first address for banks in Germany to query the credit score) can and will lead to the rejection of each loan application. Helpful here is the free self-disclosure, to which every consumer is entitled once a year. It sheds light on the prospects of a successful consolidation application in reality. Various factors can influence the creditworthiness. This includes

The fact that the new place of residence after a move can also lead to a deterioration of the rating with credit bureaus, many citizens do not know. This is still true. In particular, however, unemployment is a serious cause of negative feedback on a request for debt consolidation. In this context, the positive thing about placement portals is that the requests there are ” schufaneutral ” compared to many bank loans. Obligatory is the credit check generally with German financiers. But in the case of banks, the inquiry may have a negative impact on the chances of success, but in the case of non-binding portals on the internet, the non-binding inquiry (which often happens in parallel at many institutions) will not have any negative consequences in the interests of the borrowers. That is why it is worthwhile to find the right address for the application.

Debt consolidation in case of unemployment

In turn, the new unemployment situation would usually lead to applications for debt consolidation being rejected. Such developments must also be reported to current funders. If it comes to financial difficulties, even a demand of the banks for early recoveries can be the consequence. It would create considerable difficulties for borrowers

How much money can I apply for a debt consolidation?

The decisive factor for the maximum that borrowers can call in the course of a debt consolidation depends on the particular personal situation. An important tool for identifying reasonable and even possible loan amounts is the budget. Many banks and credit intermediaries are available to assist customers on this point through a household calculator. This is good because the customer will be reminded of all major expenses. When reading the account statements, it can happen again and again that one or the other cost factor is overlooked.

Your list of regular issues may include all or some of these issues:

  1. Rental payments (including all ancillary costs of electricity via gas to the Internet)
  2. Services for the own garage for the car
  3. Contributions for the private pension
  4. all premiums for insurance (household contents, liability, car insurance, etc.)
  5. Alimony payments for partners and children
  6. Contributions for clubs and other memberships (gym etc.)

Depending on the borrower, the analysis of the monthly and annual expenditures brings further fixed costs to light. Most payments are binding, while memberships can often be terminated at short notice. Calculate your costs accurately to see how much of the household’s income is left. This evaluation work is especially important if you want to get more money than adding up all current credit costs per month. Of course, the expenses are offset by income such as self-sustaining money or money that owners get from renting and leasing. In any case, take enough time for the calculations, so as not to overlook any important point. General statements about the maximum debt consolidation agreements are hardly possible. Exceptions are overdrafts, where two to three times the net income is the default. For normal installment loans, banks rely on quite different calculation models.