The latest developments on the financial market show significantly falling interest rates for installment loans and thus significant savings opportunities for borrowers. According to a current analysis by the comparison portal Verivox, consumers can save up to 1,100 euros by refinancing their existing installment loan.

The Verivox survey shows that almost half of Germans (45 percent) currently have debt, with installment loans making up the largest share at 21 percent. Especially for borrowers who took out their loan at the end of last year, when interest rates were still at their highest, there is now an opportunity to significantly reduce the interest burden by switching to more favorable conditions.

According to the German Bundesbank, the average interest rate for installment loans was 8.72 percent in November 2023. Assuming that a consumer repays a remaining debt of 21,000 euros under these conditions, a total of 4,784 euros in interest will be due over five years. For comparison: In April, the average interest rate for a debt restructuring loan at Verivox was only 6.79 percent. By rescheduling their existing liabilities at the new, more favorable interest rates, borrowers could achieve total savings of 832 euros. This calculation already includes a possible prepayment penalty for the old loan of 1 percent (210 euros). This fee is charged by banks as compensation for lost interest income, unless otherwise agreed in the loan agreement. By law, the amount of this compensation for loans with a term of more than one year is limited to a maximum of 1 percent of the remaining debt. Without taking this fee into account, the savings would increase to 1,079 euros.

“Refinancing makes sense if the potential interest savings are higher than the amount of the early repayment penalty. Therefore, when taking out a loan, consumers should pay attention to flexible contractual arrangements that allow free special repayments of any amount. This has long been standard at many banks and has no negative impact on the interest rate,” advises Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH.

To the FOCUS online installment loan comparison

The further development of interest rates is closely linked to the monetary policy decisions of the European Central Bank. If, as is widely expected, the central bank lowers key interest rates in the coming summer months, this could further increase the attractiveness of debt restructuring.

According to a study by Verivox, there are clear gender differences in dealing with debts and loans: While 15 percent of men surveyed reschedule their loans, only ten percent of women do so. Conversely, 54 percent of women are willing to accept personal restrictions in order to cope with financial burdens, compared to 46 percent of men.

The calculation of the savings potential is based on the data of all debt consolidation loans concluded via Verivox in 2023 with a median interest rate of 6.79 percent in April 2024. The survey conducted by the opinion research institute Innofact on behalf of Verivox in November 2023, in which 2,497 people took part, underlines the relevance of debt and loans in the German population.