When to take a consolidation loan?
The answer to the question: when to take a consolidation loan? it is not simple. For each decision to restructure debt should be the result of the calculation of the actual creditworthiness and costs that must be additionally incurred when extending the loan period.
People who incur excessive credit obligations often do not realize the consequences of their actions. The problem arises when the sum of all monthly installments exceeds the financial capacity of the indebted.
Another cause of problems with debt servicing may be job loss or a random event such as illness, unhappiness caused by flood, fire, etc. Not infrequently in one day a well-off person can fall into real financial trouble.
The first instinct in such a situation is to reach for an additional loan, which will temporarily allow repayment of previously incurred liabilities. Sometimes it allows you to get out of a short-lived embarrassing situation, but more often it causes an increase in debt and the inability to repay installments.
The Association of Polish Banks in the consumer guide advises that in the event of problems with debt service, immediately contact the institution to whom the money is owed. Banks can not only give us leave to pay off the installments, but also to propose a new repayment plan (which usually involves lengthening the loan period).
When is it worth applying for a consolidation loan?
A consolidation loan is aimed at combining many obligations into one loan, which is usually lower interest rate, but its repayment is extended in time to make the installments smaller than before.
- After such a loan it is worth reaching when:
- We have more than one debt,
- We do not deal with the repayment of all installments in a fixed amount,
- The interest rate on the new loan is good for us.
However, not every consolidation loan can be obtained. In order for the bank to consider the application for a consolidation loan, it is necessary to take care of its credit history. People who do not have such a history or people with bad history (unreliable in repayment of obligations) will not receive a loan.
In order for the consolidation loan to be low-interest, the bank will want to establish a mortgage on the property. It does not have to be a consumer loan property. It may belong to third parties who agree with such a notary act.
What to look for?
When applying for a consolidation loan, it should be remembered that by paying lower installments as a result, we will pay more money to the bank anyway. This is caused by a longer lending period. This is associated with an additional 10 or 20 years of repayment from which interest will be charged.
It is good before signing a contract with the bank to calculate how much we will eventually have to pay to the bank and whether it is better, however, to pay higher installments.