A consolidation loan is a financial product that is often the only solution when someone is not able to repay the obligations. It consists in combining all loans into one debt, which has a joint installment to be repaid. What do you need to know about a consolidation loan and is it worth choosing?
- Consolidation loan – what is it and how it works?
- How to get a consolidation loan?
- Interest on the consolidation loan
- Comparing consolidation loans
- Consolidation loan for indebted households
- Is it worth taking a consolidation loan?
Consolidation loan – what is it and how it works?
A consolidation loan is a good way to combine several loans into one. The most important thing is that this financial product is characterized by the same interest rate and a lower monthly installment, thanks to which people who have problems with repayment obtain a repayment option beneficial for their budget. The loan period for all these products is also common.The consolidation loan allows the possibility of combining various financial products. So you can combine cash loans, installments, car loans, credit cards and even current account debts.
How to get a consolidation loan?
To obtain a consolidation loan, it is necessary to present specific documents. It is a personal ID, a certificate of the type of employment and the amount of income received. It also happens that a person applying for such a loan may be asked for a bank account statement. In addition to such basic documents, loan agreements of incurred liabilities should also be presented. The amount of monthly installments, repayment schedule etc. must be known. The bank must also confirm that the last payments have been made.
While analyzing the borrower’s situation, his credit history is also taken into account. It is checked in Retrodatabase, that is in the Credit Information Bureau. Banks also pay attention to creditworthiness in order to be able to assess what monthly liabilities a borrower can afford.
Interest on the consolidation loan
The purpose of the consolidation loan is to enable the borrower to repay. It is no wonder that the interest rate may be lower than in the case of previously undertaken obligations. This is also happening for a different reason. The loan period is extended, there are more repayment installments, so they are lower.
Comparing consolidation loans
Before making a decision, it’s worth considering to choose the cheapest consolidation loan. Therefore, it is necessary to review special rankings of consolidation loans in order to be able to choose a product beneficial for us. You can also use the consolidation loan calculators that will simulate and calculate how much the expected installment would be for the current financial obligations. To be able to use such tools, simply enter basic information such as loan amount and period. After a while, offers of specific banks will appear, in which you can check what interest rate is, APY, commission, installment, but also the total amount to be repaid.
Consolidation loan for indebted households
A consolidation loan can not always be given to indebted persons. Banks must be sure that a person will pay their debts regularly. For this reason, they check the information contained in Retrodatabase, and there are data on, for example, problems with repayment. Then, banks may refuse to grant a consolidation loan to indebted parties. However, there are companies that offer such a solution. Consolidation loans are available. How do they differ from the loan? Above all, they are more expensive. Institutions that provide such benefits must be secured in the event of non-payment, hence higher costs and interest. The upside, however, is the fact that they do not check the information contained in Retrodatabase.
Is it worth taking a consolidation loan?
Of course yes. If somebody has several loans, thanks to such consolidation, they can combine them into one commitment. This will not only significantly reduce the monthly costs of repayment of loans, but also extend the repayment period. The advantage is also that the borrower will have to remember only one installment, not a few, which reduces the obligations related to payments and remembering to meet deadlines. So if the consolidation loan is the only way out to not get into debt, it is worth considering such a solution and see in which bank the best offer of consolidation loans is. And there is no shortage of proposals. The rankings of such financial products include such large and popular banks as mBank, PKO, WBK or ING Bank Śląski. It is worth checking to what amount they allow consolidation. Most financial institutions allow repayment of liabilities up to the amount of about PLN 200,000. Some banks, instead of consolidation loans, offer mortgage loans that can be used for any purpose, including early repayment of debts.