A loan for debt restructuring is a good idea for every borrower and for the lender – if it is communicated and applied for correctly – it is also an opportunity to grant a good loan. This approach can certainly be best compared to that of a company that is reorganizing its supplier relationships or consolidating its bank details. The loan for debt restructuring should definitely lead to lower interest rates and thus to more available free purchasing power.
The indication of the purpose is important
The simplest case for the loan for debt restructuring – and at the same time the most money-saving variant – is the simple rescheduling of an existing overdraft facility with an often double-digit interest rate on a cheaper consumer loan, perhaps even at the same bank. This also offers the chance to keep track of the repayment.
For example, if you want to redeem a overdraft facility loan of just over 2,000 USD, you pay just over 100 USD per month for interest and repayment over a two-year term. In the case of a overdraft facility, the checking account is always in the red and the borrower too easily loses the overview of what has already been repaid and what balance should be reached if the repayment is scheduled.
Debt restructuring can also be useful for multiple loans
A loan for debt restructuring is somewhat more complicated if the borrower has taken out several loans. Perhaps the total monthly installment is still too high, but the installments can still be paid and paid on time. Then it is high time to reduce the monthly charge before a negative Credit Bureau entry occurs. The total amount of the loans is replaced by a single, new loan and the old loans are repaid directly from this new account. The relief to the borrower results from the fact that the monthly installments are somewhat reduced by the loan term being slightly extended.
Here, the main advantage of taking out a loan for debt restructuring is not the interest savings, but rather the fact that the monthly charges are reduced due to the extension of the term. If you use one of the flexible loans from the new credit providers, unexpectedly received funds (such as bonuses or overtime payments) can be used at any time to immediately reduce the debt burden. Then the advantage clearly lies in the clear structure with only one contract partner, who is also extremely flexible.
Taking out a loan for debt restructuring is therefore one of the best ideas that can be implemented. However, you should not immediately use any overdraft facility that becomes available for new debt.