The word consolidation comes from the Latin consolidato, which means bonding, unity. In banking, the word consolidation is used when you mean a combination of two / more loans or credits. How exactly does it work?
Imagine a situation in which we take out several different loans (for different or similar purposes, it is irrelevant in this example). This involves the monthly payment of several loan installments. When we use a consolidation loan, we combine several debts into one to not only facilitate bills (e.g. due to one repayment date), but also reduce the value of monthly liabilities.
Payday loan consolidation loans with us are easy
A consolidation loan is a type of specific loan. It is intended to pay off existing financial liabilities. It is worth emphasizing here that there is no compulsion to consolidate all loans held. We can choose which of them we want to combine and which to pay back under unchanged conditions. What types of debt can we consolidate? Here the selection is wide and includes.
It should be emphasized here that individual contracts may be concluded with various banks. It happens that some of them specify restrictions on the amount of liabilities that may be subject to consolidation. Therefore, if we begin to consider the option of consolidation loan, it is worth to learn more closely the rules of a particular financial institution regarding the policy of granting consolidation loans.
As with any other loan, your creditworthiness will be checked when you take out a consolidation loan. If you have it, there is a high probability that with the help of a consolidation loan you can convert several loan installments into one of lower value than the sum of the previous ones. If you are still in doubt, it may be a good idea to consult with us for payday loan consolidation loans.
Is the consolidation loan profitable?
It is not necessary to convince anyone that reducing several monthly payments to one will facilitate everyday life and may improve the current budget. There are cases where debt consolidation is not only a convenient tool, but also irreplaceable. This happens when we are unable to pay off the monthly sum of all loans.
Taking a consolidation loan can pay off if our debts fall due to high interest rates on the market. If the borrowing rate is currently low compared to the period, the consolidation loan can be an attractive alternative to paying off debts.
A simple calculation is enough to state that the reduced installment resulting from the consolidation loan will extend the repayment period of some consolidated loans. It is by extending the repayment period that it is possible to reduce the new installment. Of course, the offer for consolidated loans differs depending on which bank we take out. No matter where we take it, we have to take into account one very important issue, closely related to the extension of the loan period.
Although in the short term, a consolidation loan is a convenient and sometimes necessary solution, in the long run it may also be a costly solution. Extending the loan period will make the sum of costs higher. As a result, it may turn out that although we have consolidated loans to pay a smaller installment, in total we will refund banks much more money than we would return without consolidating loans at all.
Who is the consolidation loan for?
Consolidating loans is certainly a beneficial option for people who cannot cope with the ongoing repayment of liabilities. The consolidation loan allows you to quickly lower the installment. In cases where the debtor has financial problems, a consolidation loan may be the only option for paying off the debt. However, if you do not face such problems, but are considering taking a consolidation loan, because we are tempted by a lower installment, you need to seriously consider whether it is definitely the best option for us. Extending the financing period is inseparably connected with increasing the total cost of the loan.
What instead of a consolidation loan?
If the reason for taking a consolidation loan is a lack of financial liquidity and difficulty repaying liabilities, you may want to explore other options. Here a lot depends on the offer of a particular bank. Possible are credit holidays, consisting in postponing the repayment of the principal and interest installment of the loan in its entirety. Another option is the grace period in repayment of the installment, which differs from credit holidays in that it is a suspension in repayment of only the capital part of the installment of the liability. It doesn’t matter which option convinces us more, each decision should be preceded by an exhaustive research.