How to consolidate debts: at what point do you use them?
Debt consolidation can be a very useful tool to get back to a loan more easily: here’s how
Debt consolidation is a procedure that allows the consolidation of multiple loans into a single installment, effectively transforming all the loans previously contracted and making them converge into a single line. In practice, therefore, the installment and the repayment schedule are renegotiated.
Usually to obtain this type of loan it is necessary to resort to a financial institution that, once the request is accepted, proceeds to the settlement of the debts in course by the contractor. In this way, the requested amount is reconditioned with lighter times and installments: the final objective is to allow the consumer to return to the easiest conditions, return which would be much more difficult (or not at all) without the completion of this possibility.
How to make a debt consolidation in an intelligent way
If used wisely, the consolidation of a debt can turn into a very interesting means for the debtor. This procedure allows the debtor to make a single payment, compared to many minor payments that he would have to make otherwise. If the interest rate of the new loan is lower than that of the previous loan, this will be a chance for the debtor to save on his monthly payments. But beware of too long durations.
Debt consolidation is not a useful tool for every occasion, it is not a panacea that solves all the ills how banks and financial companies try to make us believe: on a general level, when the situation concerns people in economic difficulties, consolidation it is appropriate when it avoids over-indebtedness or bankruptcy and reduces payments to reasonable levels. Should the debtor succeed in obtaining a loan at a lower interest rate than the previous ones, then consolidation can embody a very good choice.
Debt consolidation: advantages and disadvantages
The advantages that debt consolidation offers to consumers are of two types in daily practice: a procedural modality able to lengthen the duration of the loan already in place and therefore to lighten the amount of the individual installments. On the other hand, it can become the tool in which to bring together multiple previous loans (in the case in which they provide for the clause of early extinction), they transform the whole into a single relationship with a single credit institution, through the unification of different installments in one.
To fully exploit the debt consolidation mechanism, the consumer / debtor must reach an agreement with a financial institution. This, after the contract is signed, proceeds to the settlement of the debts in course by the contractor, redistributing them on a new project of financing. The objective behind this procedure is to allow the return from financing in conditions that are easier for the consumer.
In Italy, the debt consolidation allows to obtain a loan of up to 30 thousand euros (repayable in a maximum time of 120 months).
Who can ask for debt consolidation?
Obviously not all are given the opportunity to benefit from the consolidation of debts: before granting a debt consolidation loan, the financial institutions make a real assessment of the financial soundness of the requesting consumer.
There are three key requirements that oversee the granting of the possibility:
- The institution’s risk policies (a factor that is hard to weight and which unfortunately does not depend on the consumer),
- The income level (often decisive element)
- The creditworthiness of the applicant.
The requirements for access to debt consolidation change depending on the company to which you are addressing, but basically the essential requirements are a permanent employment contract, a working age of not less than 24 months and the absence of protests, foreclosures or reports as bad payer.
Beware of consolidating bank debts
Ultimately I would like to highlight what the correct attitude should be when presenting us at the bank or financial desk to request a debt consolidation. Warning: never show the bank an attitude of strong interest. Rather we must have a sure and determined attitude without ever showing feelings of “need”.
According to our experience and the advice of our Sam Weller technicians, all banks and financial companies have a “price list” for the different types of customers.
When the employee or the agent of the financial perceives that you “have a strong need” of the loan will take advantage of the situation by choosing a “list” or financial table more expensive to your disadvantage.
Another technique to deter the bank or financial institution from applying the “dear” table to it is simply to let your interlocutor know that you already have other quotes in hand.
Finally I would like to mention that the debt consolidation loan can be a double-edged sword. It is useful if used with intelligence but it can also be the form to get into debt for too long.