Germany’s economic situation is tense. Inflation is at high levels, the cost of living is rising and soaring energy prices are making budgetary planning huge. FOCUS online says what borrowers need to know now.
The ECB has already raised the key interest rate to 1.25 percent. This is good news for savers, but bad news for borrowers.
If the fixed interest rate expires soon, the rate for the loan could mean a heavy additional burden in extreme cases.
FOCUS online says what to do in such a case.
First you should check how big the financial gap is and whether there will be any improvement in the coming months.
If you have a short-term problem because of one-off unexpected expenses, you can consider taking a break from the installments.
You can also overstrain your checking account, thereby taking advantage of the bank account’s overdraft facility. Banks allow this offer to be paid well. A credit line can cost up to 16 percent interest per year. For example, if you have claimed an average of 1000 euros, you will pay almost 160 euros in interest per year.
You can also pay smaller sums with a credit card. Almost all banks offer installment options for the credit card.
In the case of larger financial gaps and long-term challenges, talking to the bank helps. There you can agree on a break in installments, a deferral or debt restructuring. If you have residual debt insurance, you can often activate it in the event of insolvency.
If you can no longer pay your installment for the home or car loan, the bank initially switches to reminder mode and later to crisis mode. After the first payment reminders by post, dunning notices follow.
After the third reminder, the bank can terminate the loan agreement. You will receive the last reminder notice and an information letter threatening termination and the consequences. At the same time you will receive a two-week grace period to transfer the outstanding installments.
If you do not pay this reminder either, the loan will be terminated. You would then have to repay the outstanding loan amount – including interest and any processing fees – in one fell swoop.
If the bank turns on a debt collection agency after the second reminder, it is advisable to go to a debt counseling center as soon as possible.
If it becomes apparent that you are in financial difficulties, you should speak to your bank. Together you can find possible solutions. Don’t worry: strokes of fate are part of life – and there is a solution for everything.
The FOCUS Online Guide shows you how to invest your money profitably and avoid expensive traps.
For example, if you have taken out residual debt insurance for your loan, this can take over the payment of the loan installment. You can activate the residual debt insurance, among other things, if you have become unemployed through no fault of your own or can no longer work due to an accident.
The insurance covers the payment in installments (in principle) up to a period of 12 months. From the 13th month you would then have to continue paying the loan yourself. Because the insurance assumes that you have found a new job in the meantime.
What else do I have to know? Inform your bank about the residual debt insurance. In special cases, it can even take months before they actually transfer the first installment. For the transition phase, you should therefore check whether an additional installment break would be possible.
In the event of short-term financial problems, a pause in installments can help. During this time, you only pay the interest due. Once you’re back on your feet (and solvent) simply resume paying in installments.
With an installment deferral, you can completely suspend the installment for a maximum of two months. In most loans, such an option is already contractually guaranteed and also free of charge.
However, it is important that you discuss the installment break or deferral with your bank. Consumers cannot simply stop the installment, the bank must first be informed and give their consent. In addition, your advisor can ask for the reasons and, in individual cases, also request receipts.
If your monthly income slides down over a longer period of time, it helps if you extend the outstanding loan amount over a longer period of time and thus also push the rate down. In addition to this, you can also reduce interest rates by rescheduling your debt.
Debt restructuring is worthwhile if you pay off one or more loans and pay different interest rates for them. You take out a new loan (with more favorable conditions) and use it to pay off the old loan.
In this case, you can not only set lower interest rates, but also lower monthly payments.
Consumer advocates warn. Especially in times of Corona, the offers from credit brokers who advertise “unbureaucratic help” or “Schufa-free” loans have increased.
The Schleswig-Holstein consumer advice center warns: Such offers often result in additional costs and in the end the mountain of debt is only greater.
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