Debt rescheduling despite negative credit rating: hopeless?

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Is debt restructuring possible despite a negative credit rating? That is one question. The other question is whether refinancing in the case of creditworthiness problems makes sense. In other words, whether it’s worth it. We want to try to answer both questions as comprehensively as possible.

We don’t make empty promises. You will therefore also find out when an application for a debt rescheduling loan with negative credit rating is hopeless from the outset.

Who can expect a debt rescheduling loan despite credit rating?

Who can expect a debt rescheduling loan despite credit rating?

Debt restructuring means exchanging two loans. The remaining debt of an existing loan is replaced by a new loan on different terms. The new loan will not be granted without another credit check. The reliability of the loan repayment by the customer is checked. This is done with information from a credit bureau; mostly it is the credit rating.

The economic performance is also examined.The documents on income, assets, debts and personal circumstances submitted by the credit customer serve as the basis for the creditworthiness check based on the bank’s internal lending guidelines.If the customer passes the credit test of a certain bank, he receives an offer via a debt rescheduling loan. The conditions for this result from the previous credit check.

The less income there is and / or the more problematic the scores are, the more difficult it is to grant a debt rescheduling loan.

Sufficient income basic requirement

Sufficient income basic requirement

Every borrower must have enough regular and freely attachable income to be able to service the loan installments. The amount of the installments results from the loan amount of the new debt rescheduling loan, the fixed effective interest rates and the term. The loan amount issued will regularly correspond to at least the remaining amount of the old loan. By extending the loan term, the installment burden can be reduced and thus possibly adjusted to the income situation of the borrower.

However, this is done at the expense of the total interest burden. Longer terms mean higher borrowing costs. Choosing a longer term can only allow loans to be granted for a certain income. But the following always applies: Anyone who does not meet the income requirements will never get credit. Debt rescheduling without income, under-income or without proof of income simply does not exist.

Hard negative entries

Hard negative entries

Hard negative credit rating characteristics are an absolute reason for refusal. Even those who have successfully overcome the income hurdle will have to forego rescheduling in the event of hard entries. Hard entries are such as affidavit, warrant or bankruptcy. As long as there are such entries, there are no small loans without credit rating. This path to successful debt restructuring is also blocked.

Soft negative features

Soft negative features

The forgotten phone bill, a late payment when buying in installments, a declined  Direct debit – such negative entries are often used as examples of soft characteristics. Financial service providers who generally deal with loans in spite of negative credit rating obviously make sure that the entries are not difficult in individual cases and are also explainable. The easiest way is to reschedule debt when credit rating entries have been completed.

Low scores that are not necessarily caused by current misconduct are treated similarly to soft negative entries. Many banks no longer grant loans after a certain credit rating. For example, at some banks, applicants must at least achieve a H score. Lower values ​​are not accepted. Lending is then excluded from the outset. Banks that accept difficult cases, on the other hand, are not so picky and also lend to customers with very low scores if the income ratios are right.

Conclusion on the possibilities of debt restructuring with poor credit rating

Conclusion on the possibilities of debt restructuring with poor credit rating

So when is debt restructuring possible with negative credit rating? Applicants must always have sufficient income that is available for a transfer or attachment. The required amount of income depends on the loan amount, term and credit-related interest rate. If the regular income is too low or the applicant is even over-indebted, rescheduling is no longer an option.

Tip: Prepare your own household bill before applying. Estimate monthly living expenses and current liabilities. Compare the sum of the two values ​​with the monthly net income plus additional income.