The number of over-indebted households in Germany is still at a consistently high level. Unemployment has decreased slightly and the number of insolvency openings has decreased compared to previous years. Nevertheless, given 3.36 million over-indebted households, it is a persistent mass phenomenon.
This is the result of the representative study “First results of over-indebtedness statistics” by GISTA, science magazine of the Federal Statistical Office, issue 2/2016. In the context of the 2015 overindebtedness statistics, 410 of the 1,400 debt counseling centers in Germany were examined and data from around 103,000 advised persons were evaluated and extrapolated.
According to the study, the main reason for overindebtedness is the loss of a job. Almost 20% of those who received debt advice in 2015 experienced financial difficulties as a result of unemployment.
Unplanned changes in life circumstances such as separation, divorce or death of the partner as well as health problems, such as addiction or accident, are among the most common causes of overindebtedness. The average level of overindebtedness in Germany is USD 34,368.
Debt is not the same as over-indebtedness
Debt is not the same as over-indebtedness. While there is talk of debt even with the smallest installment loan, one only speaks of overindebtedness when the debtor is no longer able to meet the payment claims with his income and assets.
Once you have landed in the debt trap, you can usually no longer find out without external help. Private bankruptcy often occurs. Therefore, consumers should not let it get this far and prevent overindebtedness in good time.
We have summarized the most important tips:
- If you have a relatively low income or already have to pay a number of liabilities from existing loans every month, you shouldn’t act hastily, but first, get an overview of your income and expenses. A household book can be a useful help here. Anyone who conscientiously maintains their income and expenses over a period of at least 12 months always keeps an eye on their finances. The numbers can be used to determine exactly whether and to what extent you can afford a new loan. This requires a bit of discipline at first but quickly pays off.
- Indirectly, keeping a household book forces you to take a closer look at the expenditure page and to ask whether some expenditure is necessary for the amount or at all. For example, old contracts with telecommunications or electricity providers are often expensive and do not include better services. Switching providers can often result in enormous savings. This financial scope can now be used by consumers to pay the installments for a new loan.
- Debt rescheduling can also save considerable amounts of old loans. By combining several old loans into a cheaper debt rescheduling loan, the monthly rate can be significantly reduced. Another positive side effect: The fact that only one monthly payment is debited gives you a better overview and control over your credit liabilities.
- Consumers should be well informed before taking out a new loan and should not sign the best offer straight away. A comparison of different providers based on the effective interest rate is advisable and sensible in any case. Credit comparison sites on the Internet provide a good overview of various offers and provide an initial orientation in the search for the right loan. Get free advice if you are unsure or have any questions. Good Credit cooperates with a large number of partner banks and is able to determine exactly the right offer for you.
- If despite the reduced expenditure, the income is still not sufficient to cover additional financing needs, it should be checked whether it is possible to screw on the revenue side. It doesn’t always have to be a side job. For example, if the children are out of the house, owners of an apartment or house can also consider renting premises to increase regular income.
- In principle, consumers should first check whether an additional loan is always necessary. Sometimes consumers resort to cheap financing offers from banks for convenience, although the sale of technology that is no longer used, inherited jewelry, or second and third-party vehicles could easily have met the money requirement.
- Perhaps the most difficult factor to prevent over-indebtedness is to control his desire to buy or not to be tempted by “decoy” offers to excessive consumption. Cleverly designed and designed advertising or limited promotions in retail try to encourage consumers to buy using 0% financing. Even if such offers sound good at first glance and buyers are supposed to get the interest on the loan, they shouldn’t make rash decisions. Free financing is often included in the purchase price or is actually just a slightly different form of advertising budget.
- The easiest way to get a loan is to just overdraw your account, many think. Bank customers do not even have to make a separate application for this. However, the overdraft facility is tricky. Because those who overdraw their accounts often do not think at the moment that the expenditure in the following month would have to be all the lower in order to be able to compensate for the overdraft facility. However, monthly expenses often remain at a consistently high level or even increase. At some point, you end up in a permanent minus. The interest rate on an overdraft facility is usually many times higher than that of a normal installment loan. It is therefore urgent to avoid overdrawing your checking account permanently. It is better to replace the overdraft facility with a cheap installment loan.
- Usually, banks request the Schufa score when applying for a loan in order to find out the creditworthiness of the applicant and thus to be able to correctly estimate the probability of default. However, it is not uncommon for stored data at Schufa to be out of date and therefore incorrect. In case of doubt, it could happen that an applicant’s creditworthiness is wrongly classified as too bad and the interest rate is unjustifiably higher or even rejected. Consumers who are planning to apply for a loan in the near future should therefore definitely obtain free Schufa information beforehand. This gives you an overview of the data stored at Schufa and can be used to correct or delete incorrect data.
- Should a payment default actually occur on a current loan, the person concerned should not remain passive and sit out the matter wordlessly, but instead go proactively to the bank and seek the conversation. As a rule, creditors are always interested in finding a solution together with the borrower. For example, a break in payments or a reduction in monthly payments by extending the term can be a viable option for everyone involved.
- If an extension of the term or installment break is no longer a way out, consumers should not be afraid to go to debt counseling. Those who get help from professionals in good time have a good chance of getting their finances under control again. In any case, the goal should be to avoid personal bankruptcy.