Have you fallen into debt spirals and are no longer able to pay off your monthly obligations? Debt consolidation may be the way out of this difficult situation. What exactly is it and is it really as beneficial as it might seem? We answer.
What is a consolidation loan?
This is one of the most popular banking products recently. It aims to help people who have several commitments and are unable to pay them back. A consolidation loan allows you to combine several loans into one liability, whose monthly installment will be lower. Thanks to the fact that we will have one debt, it will be much easier for us to control expenses and pay our liabilities on time.
Consolidation is a special-purpose loan, which is intended to pay off existing liabilities. It is not possible for money to be transferred to us in order to pay off debts with other banks. We can get one, smaller loan installment for which the repayment period is extended so that we have a chance to pay it back regularly.
Is the consolidation loan profitable?
Consolidation, just like a loan, involves conditions that the borrower must take into account before signing the contract. If we have indebted ourselves so much that we are not able to pay off several liabilities at once, then consolidation may be the only way out of debt and it is worth thinking about it. Before making a final decision, however, it is worth considering whether the offer offered by the bank is beneficial to us.
Combining several liabilities into one lower installment results in an extension of the repayment period, which, in turn, means that in the end, we will pay more than we would have paid for all the obligations earlier. Often, however, this is the only solution to go straight. One lower monthly installment is much easier to pay than several, which, when combined, give a large sum.
A consolidation loan can provide us not only with financial liquidity but also internal peace that we will finally be able to get out of debt.
What is worth paying attention to?
Before making the final decision about which bank we will take a consolidation loan in, it is worth comparing several offers. Take into account:
– The total repayment amount – remember that extending the repayment period and a lower installment will result in a higher total repayment cost.
– Monthly installment after consolidation – it should be lower than the sum of current liabilities.
– Commission – consolidation may require payment of an additional commission, the lower it is, the better for the borrower.
– APRC – this indicator will help you choose the best offer and initially compare consolidations in various banks.
– Consequences resulting from delayed payment of installments
Also, don’t forget to check whether the bank where you want to consolidate is reliable. Consolidation is to be a help on the way out of debt, so approach it in a responsible manner.