How can I reduce my debts? This question is asked by almost 7 million over-indebted Germans. We live in a consumer society and the easy access to debt financing increases the risk of over-indebtedness. For a long time, many debtors have not been aware that they live above their means. The fact that one pays high interest on the overdraft facility is often not noticed. Many people live by always using the credit line of their current accounts.

It is precisely this attitude that leads to long-term debt. Building up debt is quick and easy. However, this does not apply to deleverage. If you want to reduce your debts, you have to change your attitude rapidly, follow a certain discipline and have the necessary staying power.

Today we will show you the biggest debt traps as well as concrete measures and tips on how to reduce your debts.

The first step in reducing debt is taking stock

The first step in reducing debt is taking stock

Make a list of all inputs and outputs. Also, don’t forget about those expenses that arise quarterly or annually.

You can simply use pen and paper to create the household bill or enter your income and expenses in an Excel spreadsheet (or create a free spreadsheet with Google Sheets). Various free household book apps are also suitable for regular tracking of expenses.

The biggest debt traps

The biggest debt traps are those that you pay the highest interest on. Most of these are arranged as follows:

  1. Overdrafts/credit cards with partial payments (revolving cards) are often taken up to cover unexpected expenses. This form of credit also encourages consumption.
  2. Consumer loans/installment loans are taken out in order to fulfill consumer wishes for which one has no available capital.
  3. Special-purpose loans, such as car loans, are usually deposited with security that lowers the interest costs.
  4. Mortgages are usually secured with a mortgage, thanks to which borrowers receive cheap financing for the purchase of a property.

Many of the over-indebted people have several outstanding loans that they have to pay on a regular basis. Of course, the increasing number of loans also increases the risk of debt.

Now sort your expenses according to their amount and create a separate list of debts based on the interest rate.

Suppose you have a car loan with 4.5%, an overdraft loan with 12%, credit card debt with 15% and a mortgage with 2% per year. The correct order, in this case, would be:

  1. Credit card
  2. Dispo
  3. Car loan
  4. mortgage

Now you know which debts to pay first in order to reduce your debts as efficiently as possible. In some cases, it is advisable to combine several loans and to reschedule them with a cheaper loan. However, you should note some points that we will bring you closer to in this article.

To reduce debt, you must have money to pay off the debt after deducting all your regular expenses.

If this is not the case, you have two options: increase income or reduce expenditure.

Set priorities and define goals

Set priorities and define goals

In order to reduce debt, you have to set priorities and significantly reduce consumption. Especially if, after deducting all regular expenses, you do not have the necessary capital to pay off your debts, you have to optimize your expenses – we mean eliminating them.

First, look at your consumer spending. Do you always have to dine in pubs? Is coffee from your favorite coffee shop really necessary? Are subscriptions like Netflix or Amazon Prime really worth the money?

Compare electricity and network providers

Can you switch to a cheaper insurance provider or network provider? With the help of, you can also compare prices of electricity and gas providers in your area – this is also how you can save money. If you want to reduce your expenses, be sure to read our savings tips. You can find more articles on our blog and on the financial advisor to help you save money.

Of course, you can also tackle debt reduction from the other side. By making more money, you can pay back your debts faster. However, this is easier said than done. Many people have a limited amount of time. In addition to job and family, you often have little time to get involved elsewhere. There are now a few options that you should consider.

  • Ask for a raise if appropriate. This increases your earnings without spending more time.
  • Increase the working hours. If you only work part-time, increasing working hours can also accelerate debt reduction.
  • Check out part-time jobs and alternative ways to make money on the side.
  • Sell ​​a part of your assets that do not represent any added value for you.

By setting priorities, we mean above all to follow some of the points when optimizing costs or increasing revenue. In order to free up capital for debt repayment, you have to compromise and possibly change your habits.

There is no easy way to get rid of debt with the exception of winning in the dollar Jackpot. However, the likelihood that this plan will work is very slim.

Set goals for when you want to pay off your debts. This always helps to stay on the ball and at the same time to motivate yourself to reach the goal.

Keep in mind that the more capital you free up for debt reduction, the faster you will get rid of your debt. Until then, compound interest works against you and not for you. The longer you repay your debt, the more interest you pay.

Create a plan and pursue a goal


When you’ve done everything you can to free up enough capital to reduce debt, it’s important to document everything and make a plan.

Update your existing budget, define the debt amount and get an overview of the loan terms. What is the interest rate, the amount of the installments, the interest rate and the remaining term? Also, note the terms of the special repayment of the respective loan.

Info: With some lenders, you can repay your loan amount at any time free of charge and thus get rid of your debts prematurely. For some financial institutions, the free special repayment is limited to certain periods. With some providers, a special repayment is associated with a prepayment penalty. The prepayment penalty usually only applies to loans with a fixed interest rate for a term agreed in advance.

When you take out a loan, you can hardly predict your financial position for the duration of the loan. In some cases, you can get more capital during this time. Then it is advisable to pay off your debts. Can you only pay off a certain percentage of the balance free of charge once a year due to the credit terms? Then put the saved capital in a call money account until you can pay off the debt.

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