When we balance our home budget poorly when concluding credit agreements, shopping in installments, etc., it may turn out in a short time that there are difficulties with paying installments on time. When looking for a solution, we will definitely find the concept of a consolidation loan, i.e. a banking product, thanks to which we will combine our financial liabilities. The bank will collect our debts into one and convert it into one that is tailored to the financial possibilities at our disposal, with a convenient installment repayment. This is how it looks in theory and in commercials. And what is the reality? Will we improve our situation?
Adding up commitments on the occasion of consolidation means that the monthly installment is smaller, but this should not be equated with cheaper loans. Like a mantra, you have to repeat that the bank is far from charity and the proposals are always profit-oriented. This is also the case with the consolidation loan. Be prepared for the fact that, in the final analysis, consolidation will cost you more than covering the costs of your existing liabilities.
Bank consolidation loan offer
In the following table you will find consolidation loans offered by banks. You can use them both for bank liabilities and for consolidation of payday loans.
What is a consolidation loan?
The most characteristic feature of a consolidation loan is the combination of smaller liabilities incurred in several financial institutions into one with a reduced installment. The liabilities due to cash loans, loans, arrears on loans, revolving overdraft facilities, housing loans, etc. are all liabilities not related to business activity. In practice, it looks like the bank in which we want to take a consolidation loan pays back our debts for us and grants us one larger loan.
The consolidation loan is long-term. It happens that the bank requires a collateral in the form of a mortgage. Additional funds are often offered to finance other expenses that are not lacking in the statistical household. Do not forget that this “bonus” will also come back to you.
Who is the bank willing to grant a consolidation loan to?
Do you want to know if you have a chance to consolidate? Not everyone can apply for it. This product is intended for those who have not yet fallen into the spiral of debt, but are standing on the edge and are trying to get out of the difficulty with difficulty.
In addition, they pay their obligations in a timely manner. Any delay will negatively affect the conditions proposed by the bank on consolidation. Insolvent persons will not receive a positive decision. For them, the output can be REFINANCING THE LOAN .
Banks check potential borrowers in detail. Repayment of your debt in other places cannot generate too much risk for them. If you appear in the debtors’ bases, your chances decrease. The creditworthiness you have is crucial. Persons with difficulties in receiving the last installment, for example, of retirement age will have difficulties in obtaining a consolidation loan. A junior guarantor may be helpful in this case.
When does a consolidation loan make sense?
More favorable credit conditions than the current ones should be an indicator for you whether to use the offer or not. Taking loans at a time when interest rates in the country are high and then fall, going to the bank and taking advantage of consolidation will allow us to reduce the cost of credit.
An additional advantage is the combination of payments, so you need to remember only one transfer per month. The installment decreases. If the decision to consolidate was dictated by the threat of falling into a debt spiral, this solution avoids trouble. And what can be attractive for many, a consolidation loan (with adequate capacity) gives us a chance to reach for additional money for any purpose.
Be wise borrowers and don’t be late with paying their debts, but above all, borrow as much as you can pay back. Although consolidation can be beneficial, it is never free.
The interest rate on the consolidation loan varies and depends on the bank’s policy. The actual Annual Interest Rate depends on whether you decide on the option with or without insurance. The range in which the APRC is located oscillates between 7% and even 20%. Each offer is calculated individually and depends on what is the source of debt (credit, loan, etc.) and what is your ability, whether you appear in the databases, what was the repayment of liabilities before. All these variables decide whether the bank will grant you a consolidation loan, and if so, under what conditions.
Don’t let low interest rates fool you. We must be vigilant and check additional costs, commissions, insurance, etc. Always verify the total amount to be repaid and how long this obligation will weigh on you.
When does a consolidation loan not pay off?
It makes no sense to consolidate liabilities when the amount of monthly installments does not exceed our financial capabilities. It is not worth adding some credit costs and extending the repayment period. It’s better to tighten your belt for a while and deal with your troubles. Let this decision not be dictated by convenience and rationalism.
Types of consolidation
There are two types of consolidation offers on the market:
- cash – with an interest rate similar to standard cash loans, but with a long repayment period (up to 10 years).
- Mortgage – you can get a lower interest rate when you leave your house or flat, but you run the risk of losing your property if financial difficulties arise.
If your creditworthiness is not satisfactory for the bank, it may expect a person’s guarantee or property security.
Consolidation loan in which companies?
You will receive over 13% of the consolidation loan with APRC at Alior Bank . The bank should not require a surety from you with this loan.
At mBank , we won’t have a chance to get rid of debt ahead of schedule, but the APRC is at 11% and does not require a guarantor.
BNP Paribas offers its customers a loan that does not require a guarantor, with the option of early repayment, with an APRC above 11%, but with the need to provide a statement of earnings and mandatory opening of a personal account.
APRC in Credite Agricole’s offer reaches 13%, however without a fixed income certificate, but no guarantor is required. There is also a possibility of early repayment.
These are just some of the offers available on the market. You should consult your credit counselor about them. He can examine our ability without sending inquiries to the bank, and hence will match the most favorable proposal.
The most important information about a consolidation loan is that the consolidation loan is not free. He does not treat the symptoms of financial difficulties, but only the effects. Troubles can come back like a boomerang, if we do not change our consumer behavior and do not verify our monthly expenses in detail.
Loan consolidation calculator
I advise you to be careful when using the consolidation loan calculators. This type of product is treated extremely individually by banks and does not fall under standard procedures. A meeting with an advisor who will analyze our financial situation, verify receipts and monthly charges, which will allow us to find an offer tailored to our needs, may be a more favorable solution for us.
Credit is not a toy. It’s a serious commitment, so don’t take it lightly. Measure your strengths and assess your risk well. Don’t be fooled by optimistic ads in which repayment seems light, easy and pleasant. Of course, loans are for people and they make life easier, but it is worth having the back of your mind that the bank earns the most and we will have to bear these costs.