Loan Consolidation – How Out of Trouble?
In any budget, individual or family, the basic and most sensible principle should be: to spend as much as our revenues allow us to save on unexpected expenses and, if anything remains, for future consumption . For a holiday, a new living room, or replacing an old car with a new one.
Simply put, it is best to invest your energy in making money and saving. Sometimes, in order to save something, we also have to deny something and tighten your belt. However, in the future, we will appreciate it because we can indulge in something more and “for our own”, or invest in an advantageous amount, to further appreciate and grow. This strategy is also used by large companies and is said to be deferred consumption .
Unfortunately, in practical life little is evolving in such a “textbook” way. Sometimes simply spending – even if for a shorter period – exceeds our earnings, the reserves and the bills still need to be paid in full and on time.
- 1 The best is prevention = you won’t have to consolidate anything
- 2 Consolidation will reduce your monthly installments
- 3 You get the best interest if you start a property
- 4 Conclusion
The best is prevention = you won’t have to consolidate anything
At that time, a solution in the form of loans comes to mind. Nowadays it is nothing exceptional and with well-set parameters, loans can be a big help. It is essential to borrow only what is really necessary and urgent . If you calculate everything well, you should not have enough money to repay.
However, there is still one trap that few in terms of borrowing: in the vast majority of cases, when adjusting the loan amount and repayments, we calculate with current income and expenses. However, they change a lot in time, and many circumstances can suffocate with them, whether it be family gain, sickness, job loss, or worse pay.
Such fluctuations pose a risk especially if we have loans with a longer maturity. You pay for two years without problems, and the third one can get in trouble. This can be resolved, for example, by insuring the loan repayment ability . However, this is not always advantageous and some loans can be unnecessarily overpriced. However, it is worth considering it for loans with higher amounts and longer maturities.
Consolidation will reduce your monthly installments
However, if you are reading these lines, you are probably already in a situation where you have two or more credits on your neck, whose payments are too high for you, literally “fall on your head” and the risk of execution is already in the air.
In this case, consolidating your loans is the right solution for you. What exactly is it about? To put it simply, you merge all your current loans into one with more reasonable monthly installments.
In practice, it works by finding a creditor who will enter into a consolidation loan agreement with you. In other words, it will give you a loan to repay debts to all of your previous creditors. Old loans, whose repayments are too high for you at the moment, will basically disappear and will only be replaced by this single loan from the new provider with the monthly installment set below.
In order to make the “shrink” installments more acceptable, the new lender will basically “stretch” your new consolidation loan for a longer period. You will pay off your obligations longer than originally. Although you will get rid of the credit burden somewhat later, but at least you will be easier to breathe and monthly payments will not make you a problem.
The big advantage is also the fact that if you put all loans under one roof in this way, you will simplify the repayment process. You won’t have to watch when, to whom and how much to pay . You will not have to pay unnecessary penalties for repayment due to weaker memory. By having just one creditor, you only need to remember one date and one installment amount.
The fact that you have only one creditor after consolidation is also beneficial in that you also reduce the total monthly fees associated with loans. Mathematics is clear in this case: one contract equals one fee!
You get the best interest if you start a property
Finding a suitable creditor who also offers a consolidation loan among other products is no problem at all. Almost all banks and non-banks now offer this type of loan. The differences between them are in the interest rate (see APRC ) and in the conditions that creditors have set for obtaining them.
A consolidation loan will cost you the most in banks, but your creditworthiness criteria are set quite high. If they evaluate you as an inadequately solvent client or as a too risky borrower due to a negative credit record , the chances of getting a profitable consolidation loan are so zero.
At that time, there is a need for more benevolent non-bank companies in this regard who are less likely to turn your back. However, you have to count on the fact that no non-banknote will lend you cheaply as a risky client! It is true that the more you “put on”, the team with higher interest must be counted.
However, even non-banknotes have their limits: if you are too “overriding” and are among the chronic defaulters, you may, as a credit incapacitated client, refuse the loan here!
If you want to reduce the interest rate of your old loans as much as possible and minimize the amount of monthly repayments, you will get the best conditions for a consolidated loan if you guarantee the property or obtain a credible guarantor . However, for real estate consolidated loans, we advise maximum caution, because in the event of possible future insolvency and repayment problems, you might also lose your roof.
If you choose to consolidate, it brings with you one more bonus that you can, but you do not have to use: you can borrow a little more than is necessary to pay off your current loans. You get rid of the burden of old and disadvantageous loans and you can also get something extra for your own consumption.
TIP: If you are interested in consulting on obtaining a loan to consolidate old loans, please fill out our online form and a representative of one of the non-banking companies we work with will contact you. It takes your situation and offers you the right solution. You can consolidate bank and non-bank loans, credit cards, overdraft facilities, leasing and hire purchase.
If you get into trouble repaying your current loans, and the monthly payments will literally “fall on you”, then it’s time to consolidate them. Thanks to it, you can set up the installments so that you can pay them without any problems and do not get into unnecessary insolvency problems.
However, you should also be aware of the fact that consolidation is also not a free solution! On the one hand, while it will help you reduce monthly credit repayments to a manageable value, by repaying the maturity of all consolidated loans for a longer period, you will actually pay them more than before. This is a hidden “tax” for consolidating.
However, it is still better to pay back longer than not having to meet your creditors’ obligations on a monthly basis and to get a negative credit record or, in the worst case, to reach the bailiff.