Those who now have less money available because of the Corona pandemic will have to replan their expenses. Postponing expenses until later can quickly turn into a boomerang for those affected if so much piles up that it can hardly be paid off again even in better times. We show you possible courses of action after the expiration of the regulations on deferred payments and give tips on what to look out for when it comes to important points.
By the way, you can find all our consumer information on Corona on our overview page on the topic.
Attention: The options described in this article are aimed at consumers. They apply not absolutely likewise for tradesmen. As a trader you can find first information in the Corona-FAQ of the responsible federal ministry.
Get it done first: Apply for aid in a timely manner
Inquire about government assistance as soon as possible if your job situation changes and / or you run out of money. Only with the application a possible payment is set in motion. If the approval takes a little longer, you usually get money retroactively. But if you don’t file the application for a while, you will lose valuable days and weeks in doubt, which will not be caught up afterwards either.
Essential services that can help you currently:
- Short-time allowance, if you continue to work, but now make fewer hours. This is what your employer would have to request. So if in doubt, ask him about it.
- Unemployment benefits, if you are now being laid off. You should then report to the employment agency as soon as possible.
- Housing Benefit, if there is no longer enough money to pay the rent. You can apply to your municipality.
- Top-up benefits for the unemployed under SGB II /"Hartz IV" come into question if you are not entitled to unemployment benefits. You can apply for these benefits z.B. Self-employed people who are now in hardship and employees who now earn below the basic income level. Report to the job center as soon as possible.
At the moment you have to expect waiting times and limited processing at the offices. It may take longer than usual for a decision to be issued and money to be paid.
Next, clarify: Which payments have priority?
If there is not enough money to cover all the payments, you need to think carefully about which bills you are still paying. Draw up a list of outstanding payments and select those that are necessary to secure your existential living requirements. Do not let yourself be influenced by creditors who are particularly pressing, but decide according to objective criteria what is absolutely important for you at the moment.
existentially important:
- Rent,
- Energy costs,
- Telephone and Internet
- as well as food and necessary medicines,
- but also maintenance payments.
What can I do if I can no longer pay my rent??
For rents deferred from April to June because of Corona, they don’t have to be paid until June 2022 at the latest – unlike deferred bills for electricity, water, telephone or internet, which are due after 30. June 2020 are generally due in full immediately.
For many, rent is the biggest expense. Even if your landlord continues to voluntarily defer your rent: Don’t be tempted to stop paying rent altogether in order to have some breathing room financially. Because postponed is not canceled – rent payments are only deferred. Since July, tenants may again be terminated if they fail to pay. This is possible, for example, if they fall behind with the full rent or a significant part of it in two consecutive months or accumulate rent debts of at least two full months’ rent over time.
Payment must still be made in the end, only with a time delay. This means that in a few months, in addition to paying the full rent, you will also have to pay the arrears to your landlord. In many cases, such a burden will hardly be manageable. You may be able to make at least partial payments to keep the arrears from becoming staggeringly high. Important: The Federal Ministry of Consumer Affairs points out that landlords are allowed to demand interest on arrears from you. "These currently amount to approx. 4%."
If you cannot pay the rent in full, you should contact the landlord in any case and not simply stop paying the rent.
Additional criterion can also be the situation of the creditor: If your landlord is a large company, it will be able to cope with outstanding debts more easily than a private landlord who rents out a single property to supplement his pension and must continue to bear its costs.
Also, check with your municipality to see if you can get Housing allowance can apply for.
Will my electricity, gas, water, telephone or Internet be cut off if I can no longer pay??
No one should be cut off from basic services because of the Corona pandemic. These include electricity, gas, water and telephone or. Internet connection. From April to June, therefore, many utilities did not threaten or carry out freezes. However, the statutory right to defer payment expired at the end of June. If you have made use of this right, the following now applies: After the 30th month of unemployment, you will have to pay for the service. June 2020, the amounts deferred until then will be due immediately in one lump sum. It is best to discuss the timing and nature of additional payments with your provider or energy supplier in good time; it may be possible to pay in installments. Address the utility even if, you can’t pay bills starting in July.
Basic tips for the case of a power cut we give in a separate article, independently of Corona.
What happens if I can no longer repay loans?
The repayment obligation of loans regularly does not have the priority that the payment of rent, energy costs and other existential obligations have. However, non-payment or late payment of agreed installments can also lead to sometimes serious problems. This applies in particular to real estate loans, for which we have compiled tips. But even with general consumer loans, it can have unpleasant consequences if installments are not paid or not paid on time.
If you do not pay an installment on time, you are regularly in default for the outstanding amount. You must then expect that you will receive a payment reminder with costs or even a collection agency will be called in and high collection costs will be demanded from you. But be careful! Such collection costs are, at least in terms of the amount, often not justified. You can make an initial estimate of the collection costs here.
If you cannot pay several installments, this can also lead to termination of the loan. If you are in arrears with at least two consecutive installments, the bank can terminate the loan agreement and demand payment of the entire remaining debt. At the same time, the installment arrears must reach a minimum percentage amount, depending on the term of the contract.
If there is a certain amount in arrears or if the loan has been terminated, the lender can disclose an assignment of wages – which has usually already been agreed in the loan agreement – and make payments z.B. Demand from your employer. If the loan has been terminated, the residual debt can also be titled by a court and the title (e.g., a mortgage) can be used to secure the loan.B. enforcement order or judgment) the enforcement can be pursued. But in both cases, the lender can only receive the garnishable portion of your income at most.
If you no longer meet your credit obligations, this can also lead to negative entries with the credit agencies (e.g., a credit report).B.) SCHUFA, which in turn can have a negative impact on your credit rating.
What can I do if I can no longer repay my loan(s)??
Use reserves:
If there is only a short financial bottleneck, it is possible to use reserves to bridge the gap. In order to be able to assess whether this makes economic sense, an unvarnished list and analysis of potential savings in monthly expenses should be made beforehand.
You should soon replenish your reserves in better economic times.
Beware of overdraft:
The use of the overdraft facility (also known as "Dispo") is not permitted called) on the current account is at most temporarily an option to service loan installments. Always keep in mind: the interest is very high and the account must be balanced again. You are likely to pay the installments of a more favorable loan with the fact that you are in expensive debt through the Dispo. The overdraft facility should therefore only be used to overcome a short-term liquidity bottleneck.
Reduce or suspend installments, renegotiate term – and be careful when rescheduling debt!
Especially if you have high loan payments, you can try to negotiate with your bank to agree on a rate reduction or suspension/deferment of individual installments for a certain period of time. But attention! This usually results in additional costs, even if you can make up deferred amounts in the short term again. The longer it takes to repay the loan as a result of such changes, the more expensive it will be overall. Therefore, weigh well whether these contract changes really help you over the difficult period and justify additional costs. It doesn’t make sense to get short-term breathing room when it’s clear that the deferred or new obligations (also) can’t be met permanently.
Debt rescheduling – i.e. concluding a new loan agreement to replace the old one – is likely to make sense only in the fewest cases. Nevertheless, in some cases such a solution – possibly. with conclusion of a new, more expensive residual debt insurance – consumer:inside offered. Be careful and only take out such rescheduling if you are sure that the rescheduling actually makes sense for you and will not simply be more expensive. Because even combining several installments into just one can overstretch a budget and in the end, in addition to additional costs, only delay the failure of financing.
Appointment at a non-profit debt counseling service
If it is clear that there is no longer any realistic possibility of paying the loan installments without being unable to service other – existentially necessary – payment items (such as rent, energy costs and groceries), you should consult a recognized, non-profit debt counseling service. This will help you find ways out of debt. You can find more on this topic here.
Do not hastily terminate important contracts for old-age provision
Who has suddenly less money at the disposal, asks itself now possibly whether it is not time to put some long-term contracts on the test stand, which are intended for the age precaution.
But beware: for Riester contracts, the company pension plan, Rurup contracts or private contracts, for example in the form of classic capital-forming life insurance, it may be advisable to regularly check whether one’s goals have changed and whether the contracts originally concluded still fit. However, you should not part with it rashly and hastily! The situation is all the more tricky with Insurances against occupational disability, Because many people can no longer take out such a policy at an advanced age with often increasing illnesses.
Even if there are good reasons not to rely on traditional life insurance policies to build up capital, you should not terminate them prematurely once they have been taken out. The acquisition costs are usually already paid in full after five years anyway. Old contracts have an attractive guaranteed interest rate of up to four percent on the savings portion, depending on the date of conclusion. And you may have taken out supplementary insurance of a kind you can’t get today (z.B. an occupational disability insurance policy).
Criteria for an endowment life insurance no longer fits your goals and you can change something about it:
- the acquisition costs have not yet been paid in full
- The guaranteed interest rate on the savings portion is low
- and the unattractive contract would still run for many decades.
If you still want to part with a life insurance policy, please also note: It may be possible and significantly better for you not to cancel the policy, but to revoke it. You can read more about this in our separate article. In addition to a cancellation, you can also consider a sale on the secondary market.
In the case of Riester contracts, there may additionally be other reasons to continue them – as far as possible:
- These contracts are to be part of an additional private pension plan. Conversely, the liquidity gained today means a lower income in retirement. Therefore, such a step must be well considered.
- Government subsidies through allowances and / or special expenses increase the return on these contracts.
- Riester contracts guarantee the sum of contributions paid and allowances received at the start of retirement.
- Older Riester pension policies may still have high guaranteed interest rates and annuity factors.
- The cancellation of Riester contracts with payment of the capital leads directly to repayment of the subsidies and taxation of the income with the final withholding tax.
Straight families with old contracts, which achieve high promotion ratio by child allowances, should Do not terminate Riester contracts prematurely. An alternative is the temporary exemption from contributions. Obtain written confirmation that the contract can be continued later under the same conditions.
As a result of the continuing low-interest phase and subsequently Lower guaranteed interest rates However, especially for newer contracts, one has to calculate with a "sharp pencil" whether riestern is still worthwhile. For some time now, insurance companies and banks have been offering eligible persons unit-linked Riester contracts as a supposedly better alternative in order not to have to pay the high guarantees for old contracts.
Instead of termination: What premium waivers, deferrals and dormancy mean
If it is now a matter of having to service rent, electricity and basic living expenses due to current losses, living today is more important than living 30 years from now. But even then, in case of doubt, a deferral or a dormant contract is the lesser evil than a premium waiver or termination. If up to now 2100 euros per year flow into the Riester contract and one stops this for one year, one renounces the basic allowance of 175 euros for the year, but has – if there are no further allowances – in the period monthly scarcely 160 euros more for other things at the disposal.
In the case of Rurup contracts, termination is not possible at all; these contracts can only be made non-contributory.
However, all three processes – non-contributory continuation, deferral and suspension of a contract – also have consequences: