Debt consolidation and consolidation loan
Debt consolidation is one way to deal with the repayment of too many liabilities, which is why more and more people are deciding to do so. It is only quickly noticeable that the offer of financial institutions includes both loans and consolidation loans. What is the difference? And what to do to receive them?
What is debt consolidation?
What is a consolidation loan? This is an intentional commitment, contracted to pay off other debts. What is it done for? First of all, because the consolidation loan will reduce the monthly amount of liabilities. And hence – it will allow you to optimize expenses and pay your installments regularly. How does this work in practice?
The bank “repays” all the indebtedness for you. Instead, you only have one consolidation loan. However, his goal is to relieve you, which is why his installment is usually lower than the sum of previous installments. Interest rates are reduced, but the repayment period is also extended. And the longer it is, the higher the real costs are.
So you must be aware that in economic terms it is often a more expensive solution. So why its popularity? Debt and consolidation loans help to avoid serious financial problems that arise when you stop paying your debts on time. For many people this is the only way to get out of debt completely.
How do you get a debt consolidation loan?
At the beginning we must emphasize that you should go for a consolidation loan before you start having problems paying off your debts. When information about delays in payment of installments is received by BIK, your creditworthiness decreases, and thus – the application may be rejected. Therefore, it is necessary to control expenses and analyze what the financial situation looks like.
As with any other commitment, you will need to provide your ID card as well as documents related to your earnings, workplace. In addition, you may sometimes be required to provide the loan agreements you want to consolidate as well as their repayment schedule. However, more and more banks are striving to simplify this process.
We will also add that a calculator or a ranking of consolidation loans is a good way to verify where you can count on the best offer.
Consolidation loan and consolidation loan
Is the loan and consolidation loan the same product? Theoretically, yes, because in both cases it is about the same goal – combining several obligations into one. So what are the differences?
The consolidation loan can only be found in the banks’ offer. This has some consequences. What? Your creditworthiness and BIK history will be checked carefully. On the other hand, consolidation loans can be granted by both banks and best banks. In the second case, you can expect smaller requirements, although this is usually associated with higher commitment costs. In this way, consolidation of payday loans is also easier – banks may be reluctant to look at this financial product, although this is changing.
As you can see, the differences are not significant. Instead, you should compare the interest rate and APRC for loans or consolidation loans – this is often the most important factor in deciding what will pay off more.