The incurring of a single commitment is for many consumers a great burden on the household budget. If you are in financial trouble, many take the risky decision to take another loan to repay your existing one. This is a simple path to debt. A debt loan may be the solution. What is he about?
At some point, many Poles face the decision to take a bank loan. Sometimes it is motivated by the need to obtain an emergency injection of cash for an urgent or unexpected expense. At other times, you simply need more resources at the moment that you don’t have.
As you know, obtaining a loan is not so simple. Banks operate on relatively strict terms, making a careful selection among their clients. Those who will have good credit standing are desirable. This parameter is assessed on the basis of, among others entries in the Credit Information Bureau (BIK), i.e. a register collecting information on the repayment of existing bank and loan obligations.
In addition, the current financial position is also assessed. The loan will not be obtained by a person who receives very low income with a large amount of liabilities. Commitments, by which is understood inter alia Monthly expenses for housing (rent, bills), as well as the issue of maintaining yourself and any third parties, is the third key aspect. When issuing a positive decision to obtain a loan, the bank states that the person is financially reliable for him and is able to lend him a certain amount of money under certain conditions.
Anyone can fall into debt
Borrowing in Poland has become so popular that it can already be called something common. According to statistics of the Association of Polish Banks (ZBP), 15 million Poles declare that they own or at least once had a loan. The total value of bank liabilities was estimated at $ 576 billion, at the same time providing the estimated amount of debt due to late repayment of the bank loan 1.
Although not many people who take on their shoulders really take into account the fact that they may have problems with its repayment in the future, falling into debt is a big problem among many borrowers. In 2016, the total amount of financial arrears due to late repayments amounted to $ 53.7 billion 2. There are many reasons for this phenomenon. Often, people planning to pay their debts on time face unexpected obstacles, such as illness, accident, destruction of a valuable item that needs repair, etc.
Others may also be in financial trouble by losing a steady source of income, e.g. by dismissal, the fall of a workplace, or a reduction of jobs. Such people, until now having all expenses in a relative order, lose financial liquidity. To protect themselves from the specter of debt collection and bailiffs, many are looking for a way in other bank loans or loans. Unfortunately, incurring one liability to pay the other one can, however, lead to even greater financial problems. This is commonly called a loop or spiral of debt.
Debt loan – what is it
Are there, then, any effective ways to get out of the vicious circle, which is undoubtedly incurring obligations to repay previous ones, so as to avoid obtaining the status of a debtor and the unpleasant consequences that come with it? Financial institutions try to meet the needs of consumers in this situation. For people who have more than one financial liability on their mind, it may be a good idea to take a debt loan.
A debt loan is nothing but a loan that is taken to repay all existing financial debts. One large liability is incurred, and the total amount of debt arising from other loans and other liabilities (e.g. loans) is settled from the funds obtained. After repayment, the consumer is only required to settle the amount of the debt loan. The repayment is, of course, in the form of monthly installments, in the amount previously agreed by the consumer and the negotiator.
A debt loan can be a good solution and a last resort before falling into serious debts. These may eventually result in the actions of debt collection companies, and ultimately the bailiff. Avoiding the actions of these entities will no longer be possible, and the consumer is exposed in such a situation to the loss of valuable parts of the property and a lot of unnecessary stress.
Debt loan – where it can be obtained and what conditions must be met
Once you know the theoretical part, it’s time to go to practice. Many consumers may wonder where it will be possible to get a debt loan? Well, today they are widely offered in various non-bank institutions, which sometimes specialize only in granting loans to people with debts. Due to the large diversity of the market offer, it is difficult to determine the clear conditions that must be met by applicants for a debt loan. However, you can easily specify sample entries.
- Some companies may find it necessary to receive regular income from a legitimate source. To this end, the borrower may be asked to provide a certificate from the employer that documents seniority and earnings. Others may request, for example, an account statement documenting regular payments to the account.
- The debt granting institution may also check consumer data in financial registers and debtors’ databases. BIK (Credit Information Bureau) and the BIG (Economic Information Bureaus) database, i.e. BIG InfoMonitor, KRD (National Debt Register), ERIF or KBIG (National Economic Information Bureau) can be checked. The assessment of these entries is intended to provide an overview of the consumer’s financial situation from the side of his obligations.
The debt grantor will also ask you for the exact list of debtors and full-time debt. You will need to provide:
- The total amount of debt.
- The number of individual creditors and their names, as well as the detailed amount of debt owed to each of them and the time when the debt appeared.
Debt loan – is it worth it? tips
Is taking a debt loan worth the attention? The consumer should precede the decision to incur such a commitment with a detailed analysis of his financial situation. He should remember the following basic guidelines.
- It is worth to write down your home budget in detail. The debt loan will cover the high value liabilities incurred so far, but it is also an expense in itself. For this reason, it will be good to plan your expenses for the coming months, taking into account the need to repay subsequent installments. You may need to limit or forego some expenses. It may be difficult at the moment, but in the long run – it’s worth paying the price for living without debts.
- Carefully read the market offer. A lot of companies specialize in debt relief loans today, which intensively operate and advertise on the Internet. It is worth taking a long moment to familiarize yourself with the parameters of several selected institutions and compare them with each other. We recommend – pay attention to the terms and conditions of the offer, terms and conditions for clients, debt costs (commission, interest rate) and check the company’s details. We are talking here about both the NIP number and the entry into the National Court Register, as well as the address and telephone number. Also check online reviews of the company, preferably from various sources, to avoid the risk of stumbling reviews.
- Present your financial situation clearly. If you manage to find an offer worth your attention and decide to use it, you will not avoid talking to a consultant about the state of your current finances. It is worth presenting them in a clear and honest manner, as well as negotiating the loan terms and conditions with the company’s employee. The purpose of the commitment is to free yourself from the yoke of debt, so in the interest of the consumer is to get money in the appropriate amount, which he will then be able to return.
Debt loan and consolidation loan – differences
In the context of financial commitments to help free yourself from debt, in addition to the term “debt loan” you often hear another word – consolidation loan. There is a big difference between these types of loans, though you may sometimes find them as alternate expressions. In fact, they have only one thing in common. Both commitments are made to repay their financial backlogs to free themselves from the debt loop.
On the basis of differences, they are more important. First of all, consolidation loans are financial products obtainable in the banking sector. It offers PKO Bank Polski. Debt loans are unheard of in banks’ offers. As mentioned above, non-bank companies specialize in them today, sometimes based solely on debt loans.
Such obligations can be obtained even by people with a negative credit history, who show a serious increase in debts. Banks are closed to such clients (they do not grant loans to consumers with poor creditworthiness), which is why the creation of a debt loan service is a kind of financial market response to the needs of consumers. However, you should be aware of the side effect associated with it. About this in the section below.
Debt loan – the biggest disadvantages
The assumption of a debt loan is a convenient solution for people in financial difficulties. However, it is not free from defects. The institution granting such an obligation must somehow profit from activities that are quite risky. After all, giving loans to people without good credit standing gives you less guarantee of getting your money back. Non-banking companies compensate for this by charging high costs of commitments.
In a monthly installment they may not be clearly visible, but in general and after the loan amount has been compared with the total amount of the liability – the scale is noticeable. Non-bank companies will charge a large commission, preparation fee and interest, which for the client will mean a significant expense associated with the return of the loan. On the other hand, bearing in mind the goal of freeing yourself from debts – even such an expensive loan can be worth the money.