Debt Consolidation in Germany

Debt consolidation (Umschuldung) means combining multiple debts into a single loan with one monthly payment. This often results in lower total interest, reduced monthly payments, and simpler financial management. It's particularly useful for replacing high-interest overdrafts (Dispo) with lower-rate personal loans.

Yes, foreigners with valid residence permits and income can apply for debt consolidation loans. Banks evaluate your total debt situation and income to determine if consolidation makes financial sense and if you qualify for better terms.

Savings depend on your current interest rates. For example, replacing a 12% overdraft (Dispo) with a 5% personal loan can save hundreds of euros annually. A 2,000 EUR Dispo at 12% costs 240 EUR/year in interest, while a loan at 5% costs only 100 EUR/year.

Common debts for consolidation include: overdraft facilities (Dispo), credit card balances, existing personal loans, and retail financing. Some lenders also allow consolidation of informal debts if properly documented.

Debt consolidation can improve your Schufa score over time. Reducing the number of credit accounts and lowering your credit utilization are positive signals. The new loan application creates a temporary inquiry, but responsible repayment builds positive history.

Requirements include: valid ID and residence permit, proof of regular income, list of existing debts to consolidate, bank statements showing current payments, and no recent payment defaults. Your total debt should be manageable with your income.