Debt from loans
If your debts include credit debts, you are not alone. Almost every fourth payment obligation in debt counselling concerns credit obligations. Find out more here:
How dangerous is credit debt?
There are different types of debt that have different effects on your everyday life. While rent debts, for example, can jeopardise your home, this is not usually the case with credit debts. If you have to decide, rent, energy and health insurance debts or fines and penalties should therefore generally be paid before credit debts. If the loan is not repaid as agreed, you will most likely receive hits to your credit rating and, in the event of prolonged non-payment, you will face seizure. In the case of loans, however, there is no threat of consequences of debt that could jeopardise the existence of the company. However, an exception may be a collateral given on your condominium or house.
Loan for a house or car: Be careful when you provide collateral
When taking out a loan to buy a house or car, the bank often wants collateral. Collateral relates to something of value belonging to the debtor (such as a property or a car). If the debtor is unable to repay their debt as agreed, the bank can take away this valuable item and sell it. The proceeds are then used to pay off as much of the debt as possible. The bank calls this "realisation of collateral". You can find out whether this is the case with your loan in your contract. It also stipulates the point at which the bank may sell the collateral.
A frequently used security is the assignment of wages. In this case, the bank collects the money directly from the employer. In contrast to the garnishment of income, no court order is required for the assignment of wages. This means that the bank has significantly less work to do to get the money. However, the limits of the garnishment table also apply to the assignment of wages
If you have provided the bank with collateral for your loan, you must weigh up the options. Of course, it almost always makes sense to make the above-mentioned living expenses payments first. If the property secured by the collateral is important to you, you should endeavour to continue paying the corresponding loan instalment reliably.
Our tip:
Read the small print beforehand, even if it costs you time and nerves! Credit agreements are customised, so you know your options. For example, there is often the option of instalment breaks. This gives you time to pay off urgent debts.
Credit as a way out of debt?
Perhaps you have already considered taking out a loan to pay off your debts. This procedure is called debt consolidation. The thought of having only one creditor to whom a monthly instalment is paid can be very tempting. Before you pursue this idea, however, you should ask yourself two questions:
- Can I afford a monthly instalment over the loan period?
- Is my credit score still good enough to get a loan with low interest rates?
On our page about third-party funding you will find further information on this topic. However, loans always entail a risk. The debts are not yet gone. It is best to get an assessment from the debt counselling service in your area before you take out another loan.
How much can I afford to pay? The budget plan helps!
Are you considering taking out a loan or would you like to negotiate lower instalments with the bank? You should calculate in advance whether and how much you can continue to offer the bank. Keeping a budget plan gives you an overview of your income and expenditure!
Do you need help?
Are you unsure whether debt consolidation makes sense for you? Are you at a loss as to how to continue paying your loan or do you need support in negotiating with the bank? The on-site debt counselling services can help you!