There are moments in our finances when there is an excessive accumulation of obligations. Because of their excess you can feel a bit lost and the repayment deadline is urgent. A good way out of this situation will be to take a consolidation loan that will reduce your debt to a single debt. Online consolidation loan – where do you get it and what is worth knowing about it?
Getting a loan online is easier today than ever before. Easily and quickly available, it sets few requirements for consumers, thanks to which you can obtain financial assistance for an urgent expense even in a few minutes. However, when covering your financial needs, it is worth remembering to return borrowed funds on time.
Failure to ensure timely repayment of obligations can have disastrous consequences. First of all, the lender will start charging penalty interest for delay. Secondly, it will start phone reminders and if this fails, it will submit a claim for recovery. Conscious of such threats, consumers take more payday loans. Many of them fall into a vicious cycle called the debt loop. The situation of uncertainty, lasting for months or even years, has its unpleasant consequences for the household budget. Are there any ways to free yourself from this state?
Consolidation loan – what is it?
A consolidation loan is a popular step towards organizing finances and getting out of the embarrassing debt loop. It is a variation of the loan called a special-purpose loan, which is taken out to pay off all currently different, fragmented debts. As part of the consolidation loan, it is possible to simultaneously repay non-bank loans, cash loans as well as car loans, and even credit cards and debit on a bank account.
A consolidation loan is a voluntary solution that every consumer can choose. What’s more, he has full freedom as to the choice of obligations that he wants to cover the repayment of the obtained loan. For example, if you think that you can manage your chosen loan on the original terms, you can pay it back regardless of the other liabilities you pay from the consolidation funds.
One of the biggest advantages of a consolidation loan is the adjustment of installments to the financial situation of the consumer. The institution providing support is aware that it is aimed at helping the debtor. Therefore, the consolidation loan is repaid in installments of a reasonable amount – so that their settlement is not potentially a heavy burden for the borrower.
How does a consolidation loan work?
The rules for a consolidation loan are very simple. The most transparent and legible way to explain its operation is to break down the basic parameters into prime factors.
- Submit an application to the bank for a consolidation loan.
- Provide an extensive list of all debts you want to cover with credit. Creditors, dates of commitments, repayment dates and amount borrowed should be indicated. At the time of writing the application, this status must be current!
- The bank verifies the creditworthiness, checking the history of repayment of existing liabilities. In addition, it analyzes the amount of income, monthly expenses and the number of dependents, if any. In summary, the lender carries out a standard procedure to verify your creditworthiness, which is the same as when applying for a standard loan.
- The result of the credit verification allows you to decide to grant a consolidation loan.
- The bank presents the loan repayment date and installments in which you will pay the liability.
The cheapest consolidation loan – what affects it?
When looking for a consolidation loan it is obvious that it is as cheap as possible. This form of financial support is finally supposed to release from the debt loop, bringing respite from the excess of various liabilities. Therefore, for consolidation to be an effective aid, its installments must be tailored to the consumer’s financial capabilities. We present the most important parameters that have a decisive impact on whether a given loan is really cheap.
- Loan interest rate – the basic cost of the liability, which is included in the total amount that you need to pay after breaking down into installments.
- APRC – this abbreviation comes from the Actual Annual Interest Rate. It expresses all additional loan costs expressed as one percentage parameter.
Considering the above factors, it is worth combining several available offers and isolating the most optimal one for your portfolio. Information on consolidation loans can be found on the websites of banks.
What to look for with a consolidation loan?
The interest rate and APRC are the main parameters that you must pay attention to when choosing a consolidation loan. However, this is not all. Before you make the final decision to take advantage of the offer, carefully verify the information below.
- Total Repayment Amount – Never forget the ultimate goal of a consolidation loan. It is to ensure the expected disposal of excess financial debts! Therefore, its total amount – after taking into account the costs – should not exceed the total amount of liabilities on which you repay the loan. Otherwise, you will fall into the trap of another long-term commitment that you will regulate for years.
- The amount of the loan installment after taking into account the loan costs – carefully assess whether the installment amount provided by the bank exceeds your financial strength.
- Consequences of delay in repayment of loan installments – to be sure, read the contract in detail, which addresses the issue of delay in loan repayment. Although hardly anyone is planning such a situation, it is worth knowing what additional costs and consequences you will face.
A consolidation loan without creditworthiness
A consolidation loan is a form of financial support for people who have an excessive number of liabilities on their mind. However, if the repayment deadline of one or many of them has long passed and you have been subject to debt recovery proceedings, it may unfortunately be too late for debt consolidation. This is due to the simple fact – banks do not grant loans to people who have a negative creditworthiness. Debts have a decisive influence on this – and information about them is visible, including at the Credit Information Bureau. It is a register which, when applying for financial assistance, is verified first.
Do people who have not managed to escape from the specter of debt have a chance to break out of the debt loop? Of course. In addition to banks, non-bank companies also offer consolidation commitments. On the internet, with the slogan: “consolidation loans”, you can find several offers to receive one large consolidation loan.
Consolidation loan – an alternative to the consolidation loan in the bank
A non-bank consolidation loan is a solution that settled many years ago on the financial services market. A large portion of companies that provide consolidation in this form even treats it as a priority in their business. To read the current market offer, the easiest way to do it on the Internet. The vast majority of companies are also active in the network.
A consolidation loan in a parabank – a high risk transaction!
Non-bank companies offering consolidation loans willingly advertise their services as fast, convenient and free of excessive formalities. They also often offer help to people who, due to a negative credit history, have a closed path to getting a classic bank loan. And although many offers sound tempting, this should not put the consumer on guard.
Being interested in a non-bank consolidation loan is worth caution. The non-bank sector, although since 2016 regulated more restrictive Anti-usury Act 1, continues to attract fraudsters and common criminals trying to play on human need, rush and inaccuracy. To avoid being deceived, pay attention to the following aspects that are effective security measures.
Consolidation loan – what to watch out for?
- Please note whether the offer contains information about additional costs of the loan. Also check that – by law – the additional cost of the loan does not exceed 25% of the amount of money borrowed and at the same time 30% on an annual basis. It is worth taking a moment to calculate to make sure the lender has honest intentions with you.
- Make sure the company really exists. Check the lender’s contact address, search for it on Google Maps and see if this is a fictitious institution. It is worth using the online KRS register and checking where the company is actually registered, to whom it belongs and how long it has been operating.
- If the information mentioned above does not raise any doubts, do not put the vigilance to sleep. Pay attention to the content of the contract, whether it coincides with the amount, costs and repayment date of the loan. Take a few minutes to read the contract carefully to be sure that the terms you subscribe to are fair and you know their full content.
- See how the lender regulates the issue of late repayment. Especially look at the interest, penalty you will pay in case of repayment problems. The statutory interest rate for delay is 7%.
- Never make prepayments or secret insurance loans, or pledge your valuable property.