What is the Consolidation of Loans and Credits that we have in Banks?
What is the consolidation of bank loans and loans? Is there one and an effective way to reduce the burden on the household budget resulting from the repayment of bank loans and loans? Yes. You can consider their consolidation, i.e. consider the consolidation loan.
What is loan consolidation and what is a consolidation loan? In a big simplification, this means that we turn several loans into one loan. This solution has many advantages:
- we pay only one loan installment instead of several,
- the new loan installment is usually lower than the sum of the installments previously paid,
- we only remember one payment period instead of a few,
- the opportunity to receive additional cash, which we can use for any purpose.
Consolidation loans are very popular because we have many loan products in banks.
What loans and loans are consolidated
You can consolidate, among others:
- loans and cash loans,
- installment loans,
- car loans and loans,
- mortgage loans,
- credit cards,
- credit limits on bank accounts.
Types of consolidation loans
We distinguish two types of consolidation loans:
- mortgage consolidation loans that are secured by a mortgage. In this case, one of the repaid loans is a mortgage (housing).
- cash consolidation loans. Bank loans and borrowings are subject to consolidation, with the exception of a mortgage loan.
The amount of consolidation loan
We can consolidate loans for € 60000 as well as for € 6,000. In the case of cash consolidation loans, the maximum amount of consolidation is usually € 200,000. Consolidation period up to 10 years. What amount of credit we receive for debt consolidation depends, however, on our creditworthiness and credibility.
If, however, it is a mortgage consolidation loan, its amount depends on the value of the property, which is the collateral for the loan. The repayment period of such a loan is also longer than in the case of cash consolidation loans, as it can be as high as 30 years.
What is the consolidation of loans? 1. Lower loan installment
A consolidation loan is primarily a possibility of lowering the loan installment. Very often you can find the opinion that a consolidation loan is a cheaper loan. This is not true. Why? The loan installments can be reduced in two ways: either by a reduced interest rate or by extending the loan period. The latter method allows for a radical reduction of the loan installment, but at the same time increases the total cost of the loan. We must pay more interest on the loan. There is also a commission on granting the loan. Nevertheless, consolidation loans help you regain financial liquidity and are the first step to healing our home finances. The next step should be saving and rational management of home finances. No over-indebtedness.