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Debt restructuring for students

The rescheduling of a student loan can be necessary if there are difficulties with repayment. Interest savings are rarely associated with this, because student loans that supplement or even replace the Credit Aid are granted on fairly favorable terms. In most cases, debt rescheduling of a student loan can hardly be made much more cheaply. Banks grant student loans, and KfW also offers a particularly favorable offer here. Many students would not be able to complete their studies without this additional financial injection. Most banks (but not always) pay out in monthly installments, and repayment can often start a few months after graduation. However, there is no significant waiting period such as the Credit Aid or the KfW student loan for half a year or even two years, most banks require repayment approximately three months after the payment. This means that anyone who has not yet found a job could run into financial difficulties. In contrast, rescheduling a student loan can help.

The debt trap study time

The debt trap study time

The most common cause of student debt restructuring is overdrawing your own account. In addition to the general cost of living, students must also pay fees and the cost of training materials with their own funds.

Although it is possible to apply for an interest-free loan through the Credit Aid office, the amount of this loan is limited and often not sufficient if the trainee also has to pay rent for his own living space. There is no time for secondary employment, especially in the main study, because the university events demand all capacities from the participants. It is also important to achieve a degree that is as positive as possible in order to maximize individual career opportunities. Therefore, many students overdraw their accounts to finance personally necessary costs.

At first glance, a credit facility may be tempting, since the contract or the general terms and conditions usually stipulate that comparatively long repayment phases apply. However, the overdraft facility often leads to an economic spiral building up because it is associated with high interest charges, which must also be repaid when repaying. The account holder has to calculate with higher and higher costs the longer the overdraft facility is used.

As a result, the economic situation is rapidly deteriorating and the students concerned are often at risk of falling into debt. Debt restructuring is common here
a sensible solution to meet the creditors’ liabilities.

Debt restructuring options for university students

Debt restructuring options for university students

If the student is interested in rescheduling in order to replace the legacy issues with a new loan, the search for a lender often turns out to be difficult. The problem is that credit institutions only want to provide collateral to minimize their own financial risks. However, the student usually only has minor sources of income that do not have a convincing effect on the lender.

However, there are some lenders that offer college students the opportunity to reschedule. This makes sense, because otherwise the student can get into economic distress due to the overdraft costs caused by the overdraft facility.

It is advisable to talk to the house bank where the current account has been opened. The bank will also examine the new loan application for its own interests. If the mountain of debt has already grown so high that there will be existential hardship in the future and the student will become insolvent, the bank may have to forego its claims.

To prevent this economic loss, they approve a new loan agreement that is intended to provide financial relief to the students. The possibility of refinancing enables the university student to pay off his personal debts in agreed installments. This not only relieves him financially, but also keeps his head clear for upcoming exams.

Debt restructuring of a student loan: how to do it!

Debt restructuring of a student loan: how to do it!

When rescheduling a student loan, a cost reduction is explicitly not to be expected. The old loan has to be repaid, a new one with a longer term and if possible not too high interest rates. What are the advantages of rescheduling a student loan?

  • lower monthly rate
  • Relief from reminders from the previous creditor bank
  • Avoiding a negative Credit Bureau entry
  • new creditworthiness, important for investments (e.g. in a doctor’s own practice)

There are a few prerequisites for this. Interested parties should pay attention to the following:

  • Interest on the new loan must be as low as possible, otherwise rescheduling a student loan can be very expensive!
  • The old loan must be redeemable without prepayment penalty.
  • When determining the future term, proceed with a sense of proportion. Nobody should pay off for too long, even if a lower monthly rate beckons. Otherwise the costs escalate.

It should also be noted that the lender generally charges additional fees when entering into such a contract. These should also be taken into account when deciding.

It is always advisable to compare different offers with one another, since the loan offers sometimes differ considerably. Due to the generally insufficient creditworthiness, the market for university students is naturally limited. There are only a few credit institutions that offer such a possibility at all.

Nevertheless, the few donors should also be compared in terms of their conditions in order to avoid any disadvantages from the outset. In addition to the house bank, students can also find providers on internet credit portals who may agree to rescheduling.

It may happen that the lenders ask for a guarantor for security reasons. If the student is able to name a guarantor, the bank generally has no problems in issuing a new loan. The chances are all the better if the guarantor has to offer collateral, for example a good monthly income or valuable objects.

Finally, the higher education institution should make sure that the contract agrees realistic repayment rates that they can actually service.

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