Education – usually means little money, but big wishes. The first own booth is set up and a used car is purchased. Tempting offers such as “pay later” or “0% financing” make buying easy. But young people in particular quickly lose the overview. The apartment wants to be heated, you have to pay electricity and water. The car needs petrol or diesel, and even if it doesn’t drive, it costs tax and insurance – and that is often very expensive for beginners.
Spending grows over your head
If, in addition to the costs for housing and car, there are now credit installments or an expensive mobile phone contract, the disposable income that can be obtained from the short training allowance after taxes and social security contributions is quickly exceeded. Those who have to learn and work for their apprenticeship usually do not have the time to earn a little extra. A part-time job might jeopardize the educational goal, and you shouldn’t take that risk. If the refrigerator or the washing machine breaks now, a repair on the car is due, it looks really bleak on the account. It goes into the red, and that means new expenses for the high interest on the overdraft facility. And even that is used up at some point, the house bank will no longer grant you any further loans without collateral. If you are not careful now and keep a clear head, you will quickly find yourself in a bad debt trap that is difficult to get out of.
Debt restructuring – a way out of debt
Debt restructuring is an important way of mastering the seemingly hopeless situation. Debt restructuring means that existing loans or other debts are transferred to new contracts without a reduction in the amount of the debt. Debt restructuring is therefore very different from private bankruptcy – this means a haircut that, although it allows a fresh start, is bought with serious restrictions on financial freedom. It doesn’t have to go that far.
Improve debt sustainability through lower interest rates and longer terms
But what does debt restructuring bring if the total debt is not changed at all? There are two main answers to this:
1. The interest charge is reduced. The overdraft facility on the checking account is very convenient, but disproportionately expensive. Despite a long period of low interest rates, banks and savings banks still charge an average of more than 10% annual interest. Anyone who exceeds their overdraft limit also pays a substantial overdraft commission.
Expressed in numbers: If your account is minus $ 1,000 and you have agreed on a 12% overdraft interest rate, you pay $ 10 each month just for the interest – provided that the interest does not increase your debts. Otherwise, the amount increases monthly due to the compound interest effect. You get an installment loan on average for half this interest, with some providers even under 4%. So that saves you at least $ 5 every month.
2. If this saving seems rather small, you should take a look at the effect of the extended loan term. Those who have to pay back borrowed money in a short time have high monthly installments. It is therefore important to extend the term and thereby reduce the rates. Especially in your situation as a trainee, a break in payment is also an option if the end of the apprenticeship is foreseeable and then a permanent position is due. Your great advantage is that your financial constraint is only temporary and the situation will probably improve significantly once you have completed your training.
Here is a calculation example, for the sake of simplicity, without taking interest into account: To set up your first apartment, you bought a kitchen and bedroom from a furniture store for $ 3,000 and agreed to finance it for 24 months, making a rate of $ 125 a month. In the electronics market, the flat-screen TV was so tempting at a price of $ 600 that you took it for $ 50 for 12 monthly installments. You now have $ 3,600 in debt and a monthly charge of $ 175 in the first year. Does that exceed your options? Sign a new loan agreement for $ 3,600 with a three-year, 36-month term. With this money, you pay for furniture and TV sets, and your monthly charge drops to $ 100 for the new loan. You have $ 75 more disposable income to live on.
Professional help from the debt advisor
Of course, things are not quite as simple as this sounds. You have to get a new loan first and you have to respect the notice periods of the existing obligations. Debt counseling pays off here, because there are professionals who can negotiate for you with creditors and banks at eye level. Serious debt counseling is available free of charge, for example, from large organizations such as Caritas, and the Forum Schuldnerberatung e. V. can give corresponding addresses.
A good debt counselor is not only familiar with loans and contracts, he can also psychologically understand the situation of the debtor. Although more than six million Germans are over-indebted – one in ten adults – the situation for the debtor is often characterized by uncertainty and shame. This is especially true if there are problems such as gambling addiction or alcoholism behind the overindebtedness. The following applies to you: Only if the advisor knows all aspects of your financial and personal situation can he effectively help you and bring about a debt relief. He is a professional, deals with indebted people every day and does not judge. Trust him and he can show you the way to a new financial start through debt restructuring.