UELZEN. The debt clock in Germany climbs incessantly. Nevertheless, there are significant regional differences in terms of state or municipal debt and debt per capita. Uelzen is a positive example of how optimal household management works. In fiscal year 2018, the municipality actually manages to generate a surplus of 2 million euros. Private households can also learn from this, not only in terms of proper financial planning, but also in terms of optimal financing solutions.
Uelzen top in the German financial comparison
While cities in North Rhine-Westphalia in particular are struggling with enormous debt, things look much better in some municipalities in Lower Saxony. In recent years, Uelzen has even been able to reorganize its budget to the point of achieving a surplus of 2 million euros in 2018.
The solid budget does not come by chance, but is mainly generated by a balanced plan and the growing amounts from sales tax, entertainment tax or income tax. The goal is for the Hanseatic city to get by without net new debt or borrowing until 2022, but this is not the case due to various expenditures in the coming years. For the first time in several years, Uelzen 2020 is in deficit again, has to take out loans.
More than 86.000 citizens are getting help from debt professionals: Municipality as a role model
It is not always avoidable to make debts as well as to look for additional liquid means. The best example of this is Uelzen, where the council recently decided that the budget will go into future budgeting with a deficit of 1.68 million euros. Reason for this are urgently needed renovations for building maintenance and other areas. Uelzen is dealing with this aggressively and, despite the new deficit in the budget, is trying to make solid plans for the next few years to be able to pay off the debt.
Private households are also increasingly using (short-term) loans to bridge financial bottlenecks or make urgently needed new purchases with low monthly installments. Financing exists, for example, for the purchase of a motor vehicle, the purchase of real estate, for free use or for the renovation of one's own four walls. Distinctions are made in the loans mainly in terms of duration and cost, because especially earmarked loans are, according to experience, cheaper than loans with free use.
Calculating financing correctly: Here's what borrowers should keep in mind
So that borrowers are not among the over 86.000 debtors who will need to call on the help of professionals in Lower Saxony for advice in 2019, there are already a few things to bear in mind when it comes to financing.
If you determine your financing requirements as accurately as possible, you can save yourself costly interest charges. On average, the people who visited the advice centers owed 26.000 euros to creditors. Triggered particularly often by unemployment, separation or illness. So that the repayment of their own loan does not fall into arrears, everyone should calculate exactly and also reckon with a possible loss of income. When taking out a loan, it often makes sense to insure yourself against unemployment or illness, but not in every case. Since this additional protection costs, borrowers should refrain from using it for short terms and small amounts of financing.
The fine print of these special safeguards is also interesting, as unemployment insurance, for example, does not always take effect across the board. Often, it occurs only when unemployment persists for a certain period of time, so borrowers may have to face one or two months without income and still realize the repayment of their loan.
Experience has shown that bridging aid, such as that provided to certain sectors of the economy in crisis situations, is not available to private consumers. That's why it's especially important to design the financing framework and the repayment installments in such a way that they could easily be paid for one or two months without income. At best, a suspension of installments is still agreed in the loan contract, which initially gives borrowers additional breathing room in their financial planning without income.
Do not be afraid of insolvency: always seek discussion with lender
What happens when the repayment of the loan can not be realized despite the greatest effort? Debt counseling centers can help and show some ways to reach an agreement with lenders. One of the most important tips, however, is to immediately seek talks with lenders when (temporary) insolvency is identified. If income stops coming in and credit installments can no longer be repaid, the first place to turn is always the bank.
The credit institution is also interested in finding a solution with the debtors that is as amicable as possible. This not only saves administrative effort, but also serves as a confidence-building measure for future banking transactions. If no agreement with the bank can be obtained, the influence of the debtor consultation can often help to success. By involving a counselor, credit institutions often relent and work out a plan for the future course of action together with the creditors and the debt counselor.
For all those who are afraid of insolvency and the consequences, it should be said that there is always an exemption limit with account connection and a legally regulated livelihood protection. The exemption limit is measured according to the personal income/life situation. Garnishable are for example incomes under 1.179 € per month not at all and all amounts over it only to a certain portion. If you live in a household with one or more persons, you are entitled to an even higher exemption limit from seizure. For example, in a household with still one person an income of over 1.600 € garnishment free.
This is why financing is often better than overdraft facilities
If you want to overcome financial bottlenecks, you should always pay close attention to the conditions. Although an overdraft facility is often available automatically and can be used individually up to the maximum limit, it can also quickly become expensive. The interest rates for an overdraft facility are significantly higher than for a classic loan. To save unnecessary interest costs, it may be worthwhile to go to the credit institution to apply for financing with free use.
It becomes still more flexible by the innumerable on-line offers, which save the course to the local credit institute and bring even frequently still more favorable interest out. Those who have decided to apply for a loan offer online on a supra-regional basis can conveniently submit all documents via e-mail or the bank's internal upload and often receive the decision after just a few hours or a few days. The credit limit granted is also paid out automatically to the specified reference account and is available after a short time.