Paying off your Dispokredit: how to get out of the red

Is your account always in the red? That's expensive, but it can be solved with a plan. An overdraft can bridge a short-term gap. Use it permanently, though, and it quickly becomes a burden.

Good to know: the interest on a Dispokredit is variable, and your bank can adjust it at any time.

What is a Dispokredit?

A Dispokredit, usually just called a Dispo, is an overdraft facility: it lets you take your current account below zero, up to an agreed limit.

So if your overdraft limit (Disporahmen) is €1,500, you can use your account down to that point. You pay interest on the amount you actually use.

What you can do

1. Get an overview of your overdraft

Start by understanding exactly where you stand. These questions will orient you:

• What is your current account balance?
• What is your agreed overdraft limit?
• What overdraft interest rate (Dispozins) is your bank charging right now?
• What is your monthly income?
• What other debts or instalments do you have to pay?

2. Stop your overdraft from growing

The next step is to make sure your monthly shortfall at least stops getting bigger.

Essential spending always comes first. That includes:

• rent
• electricity and energy
• food
• health insurance
• necessary medication

Then look at everything else: what could you cut? Go through your subscriptions, think about what you order each month, and how much of it is takeaway. It helps to simply write it all down.

Tip: avoid shifting the problem onto another loan.

3. Decide how much you can repay each month

With that groundwork done, you can work out a realistic amount to put towards your overdraft:

Monthly income − essential spending − other monthly commitments = the amount available in principle

Always leave a buffer for unexpected costs.

If you're left with €150, for example, you can set yourself the goal of reducing your overdraft by that amount every month.

4. Check whether you can lower your overdraft limit

Lowering your Disporahmen step by step can help. It stops you from immediately using up part of the amount you've just repaid.

Important: only reduce the limit as far as you can while all your essential direct debits still go through.

5. What if you can't clear the overdraft on your own?

If you're permanently in the red and there's no money left to repay anything, take another look at your overall situation. At that point it can make sense to get support from a debt advice service (Schuldnerberatung).

This article is general information, not financial or legal advice. For questions about your own situation, contact a debt advice service (Schuldnerberatung).