Consolidation, i.e. repayment of debts, loans, loans is a rather extensive topic. Hence, many people have different doubts in this area and many questions. The most frequent questions are, for example, what impact on the possibility of consolidation has timely repayment of liabilities, what liabilities can be consolidated, how is creditworthiness calculated, what the benefits of consolidation, and often the question about the difference between the consolidation loan and the refinancing loan. In this article, I will try to answer these questions.
It is not difficult to get a lot of financial obligations at the same time or within a short space of time. Statistics show that recently Poles are eager to take out cash loans. Loans are most often borrowed during the year from May to September during the year. During this time, the most expenses appear associated with holiday rest and preparations for the beginning of the school year. The period of increased spending begins in the communion period. We go out with each other to give a party to a child or buy gifts for the occasion. Later, holidays begin, which also do not cost much, after the rest period the school begins. Parents know best that organizing layettes for children is not one of the lowest expenses. During the whole year, there are a lot of unforeseen situations, for which we do not have saved cash. They make us turn to banks or non-bank institutions for help. Unfortunately, as you know, it is fun to borrow, but it is worse to give away. With the simultaneous payment of several liabilities, you can quickly lead to a situation where we simply fall into a spiral of indebtedness. If you wake up in time and seek remedy for your household budget, you can avoid many unpleasant situations. At this moment, the most favorable solution for you will be a consolidation loan.
Who is consolidation for?
It is an ideal solution for people who want to reduce the cost of debt service or can not cope with the repayment of several liabilities at the same time. Repayment of many liabilities within a month with different repayment dates, in various amounts and institutions is undoubtedly burdensome. It is not difficult to get lost in all this, at the same time losing a lot of money on interest. Consolidation will allow you to convert your existing liabilities into one with one lower installment. You can save a large amount of money that will significantly reduce your home budget.
Timely repayment of loans and consolidation
In order to be able to repay loans, it is important that your existing liabilities are settled in a timely manner. Of course, a few-day delay is not an obstacle to consolidation, but may adversely affect the interest rate. Any delay in repayment of loan installments that you wish to consolidate may not exceed 30 days. That is why it is a solution for people who want to avoid major financial perturbations.
Consolidation and creditworthiness
One could say that creditworthiness plays a secondary role to some extent. Remember that installments of consolidated liabilities are not taken into account for the calculation of creditworthiness.
Repayment of debts, or what liabilities can be consolidated
Most often they can be:
- a cash loan,
- car loan,
- housing loan,
- mortgage loan,
- cash loan,
- credit card,
- limit in ROR.
You must know that repayment of debts most often (in the case of many banks) can not be related to those contracted for business.
Repayment of loans and minor obligations
Consolidation of cash obligations, i.e. the repayment of loans is available at worse conditions than consolidation secured by a real estate mortgage. The differences in minus are the shorter financing period (up to 10 years), the lower the maximum amount, usually up to tens of thousands of euro, and certainly worse conditions when it comes to interest rates. The advantage, however, is that the bank does not require security.
Repayment of mortgage liabilities
Consolidation of mortgage liabilities ensures longer lending period (up to 40 years), reduced interest rate, and is offered for higher maximum amounts, usually up to PLN 200,000. In this case, it is necessary to provide security in the form of a mortgage of your property or belonging to another person (who agrees to establish a security in the form of a mortgage). Unfortunately, with this type of product there is a little more paperwork to get through and documents to gather. In addition to a certificate of income, you will also need documents regarding the property to be used as collateral for applying for a loan. Depending on what property is secured, it is a copy from the land and mortgage register, a donation contract, if it was the basis for owning the property, or an excerpt from the land registry, and a copy of the registration map, etc.
What are the benefits of consolidation?
Consolidation loans are a convenient solution that gives you the comfort of functioning without an excessive burden associated with the repayment of several installments of one month at different dates. They combine their repayment into one commitment, you will not have to remember to repay many installments at different dates. After consolidation, you pay back one commitment and one lower installment, which you reduce by lowering the repayment time. This treatment will relieve your home budget seriously, and the money saved will certainly not be a problem. By signing the contract, you can freely choose the repayment date. Thanks to this, you do not have to worry that the payment deadline will be before your payment. In addition, you get a grace period for repayment of installments and once a year, so-called credit holidays.
Banks offer a lot of interesting products, but you should approach it with reason, because there is no single offer that will be the best for everyone. The most advantageous offer presented by the bank is the one that is individually tailored to you. It is worth taking the time to find the most attractive proposal to pay your debts.
Additional cash for any purpose on the occasion of consolidation
When consolidating, you can even apply for additional cash for any purpose. This is not the same amount in each case. Its amount is determined by the internal regulations of each bank. I only mention that such a possibility exists, but I am strongly opposed to using it. The purpose of consolidation is to repay debts and, at the same time, to remain. The addition of extra cash destroys the benefits that it brings with it, and in any case considerably limits it.
A consolidation loan and a refinancing loan
Consolidation and refinancing loans are concepts that are often confused or used interchangeably. This is a mistake. It is true that refinancing and consolidation loans are very similar to each other. However, their main similarity ends in the fact that they turn our commitments into cheaper and more favorable ones.
As you already know with a consolidation loan, the bank will combine all your existing consumption obligations (loans, loans and other aforementioned ones) into one cheaper one. Thus, consolidation can cover many obligations. In turn, refinancing applies only to one mortgage or housing loan. If, for example, you took out a housing loan a few years ago, and after some time its terms do not suit you anymore, then you will refinance with another loan. Housing loans are contracted for many years and after some time, more favorable offers appear on the market. Therefore, after a few years of repayment it may turn out that it is worth changing your loan into a newer model;). A refinancing loan will provide you with a further repayment of the liability already on new more favorable terms.
It is difficult to include everything in one material, so I will try to expand the topics covered in separate articles. If you have any question about consolidation, please write to me (contact tab) and I will try to answer as soon as possible.