Growing financial obligations can drastically burden the household budget. So if there are too many of them, a consolidation loan can be the only way out of the situation. What is it about and whether it is worthwhile to decide?
Consolidation is nothing more than summarizing all the loans that have been taken into a monthly payment obligation. The biggest advantage of such a solution is the reduction of the monthly debt repayment cost. The rate of the consolidation loan is often several dozen or even several dozen percent lower than the sum of the installments of all our loans. Therefore, it is an option that can save our budget.
What can we consolidate?
Of course this does not mean that anyone can benefit from such a loan. To get it, we have to meet several conditions. First of all, we need to be aware of the exact obligations that need to be consolidated. These include the following:
- Installment loan,
- credit cards,
- Auto loans,
- the debts of the accounts,
- Cash advances.
What does the decision depend on?
We must also remember that a consolidation loan is granted by a bank, not necessarily by the bank in which we have liabilities. As with other loans, we must have an adequate credit history here as well.
People who have had great difficulty in meeting their commitments in time can face serious consolidation problems. The bank checks all information collected in the BIK (Credit Information Bureau), and if we do not reach a certain minimum, it can lead to a negative decision.
What should I look for when choosing a consolidation loan?
Of course, the costs seem to be the most important. We should conduct a thorough analysis of the offers of the banks in the market. First we should check that:
- the interest rate,
- the cost of insurance,
Surcharges – this refers among other things to the choice of the payment date for subsequent installments.
Without a proper examination of the banks’ bids, we can take out a loan that will turn out to be even worse than the repayment of all liabilities. You should always make sure that the monthly installments are smaller and that the repayment period is acceptable to us.
Keep in mind that many banks charge an additional fee for early repayment of the loan. These provisions may increase the cost of the consolidation loan. If we approach the whole problem with a cool head and after analyzing the most important issues, consolidation can prove to be a very advantageous solution.