Or take a loan debt consolidation quote is the first step to take to put some order in their finances. It often happens that, for various reasons, you find yourself having more funding in progress: what to do? Debt consolidation is a tool created specifically to merge all loans with amortization in progress into a single sustainable installment, simplifying life enormously. Let us see then what are the peculiar characteristics of this financial product, which is proposed by the majority of credit institutions operating in Italy, and how to obtain a quote to evaluate the convenience regarding the conditions applied.
Debt consolidation, what it is
Debt consolidation was introduced relatively recently by the financial market, in order to avoid excessive indebtedness on the part of Italian families. This tool consists of:
in a single loan that brings together all the current debts, allowing you to pay a single installment of a lower monthly amount, extending the repayment amortization period and applying a sustainable interest rate, so as to better manage the debt, which in this way it will weigh less on the family budget.
There are several advantages of debt consolidation, which allows you to combine multiple loans in one installment:
- Debt amortization simplification
- Combination of funding also very different from each other
- Less risk of forgetting deadlines
- Lower the amount of the installment
- Decrease in interest rates
- Lengthening of the repayment period
- Possibility of obtaining additional liquidity
- Avoid being reported to the CRIF, register of bad payers
How to apply for a debt consolidation quote
Before even instructing the practice, it is a good idea to get a loan consolidation loan, even better to get more quotes from various lenders and financial companies, in order to assess the conditions applied with particular attention to the interest rates TAN and APR. Or use the comparators on the Net to instantly see the best offers of the moment.
Online debt consolidation can also be requested, significantly reducing waiting times, and thus being able to obtain the necessary loan more quickly.
Requirements for access to financing
Not everyone can access the debt consolidation loan, but certain requirements are necessary. To be considered a potentially financeable customer, the credit institution must assess that the applicant is not a financial risk, therefore the following factors come into play:
- The ratio of revenue to monthly payment must be sustainable
- Guarantee of a pay slip or pension
- In the absence of this, a guarantor may be required as additional protection
- Not to be reported as a bad payer
It may sometimes happen that an institution can request the signing of a bill of exchange for all or part of the loan, while in general a mortgage on a property is not guaranteed against insolvency, unless it is a loan for consolidation debts.
The documents to be presented
The documentation to present to obtain the debt consolidation loan provides:
- Copy of the identity document
- Health card or tax code
- Pay slips or pension payslip
- Extinct counts
The extinguishing counts are the means that allows the new bank or financial institution to calculate the residual debt that must be repaid to the original creditors, and are the basis for determining the amount of the loan to be granted as debt consolidation.
How debt consolidation works
After requesting the debt consolidation loan estimate, having evaluated the convenience and started the preliminary procedure, in the event of a positive outcome, the loan is granted, which may also include additional liquidity in addition to the residual debt to be repaid. With debt consolidation
one relies on a single credit institution or financial company to repay debts, having a single installment to be paid. The loan has a fixed rate, and the amortization period can be extended up to 120 months (180 for mutual amortization). The longer duration allows the monthly repayment installment to be kept lower and therefore more sustainable
How to evaluate convenience
Faced with a preventive consolidation of debts, it is necessary to evaluate the convenience of the offer by observing in particular the detail of two percentage values that represent the interest rate, or:
- TAN (Nominal Annual Rate), which indicates the percentage value of the interest portion applied to the repayment of the loan
- TAEG (Effective Global Annual Rate), which indicates the percentage value of all expenses related to the repayment of the loan
In particular, the value of the APR is decisive for understanding how advantageous the financing offers are: the lower this value, the lower the costs for the debtor. In the loan contract one must also evaluate some particular conditions applied (such as the default rate) and any additional insurance coverage, which can also weigh heavily on the total cost of the loan.
Is loan or mortgage better as debt consolidation?
They are two similar instruments, but what differentiates the loan and the debt consolidation loan, in addition to the presence of a mortgage on a property, is also given by the necessary amount, in order to assess which of the two is more advantageous. For general reasons we can agree that
the debt consolidation loan is the best instrument for figures from 5,000 to 10,000 USD, while from 30,000 USD upwards the debt consolidation loan is more convenient. We also remind you that with the mortgage it is possible to extend the amortization plan up to 180 months (or 3 years) for amounts between 60,000 and 80,000 USD.
Then there are situations in which the debt consolidation loan is not the most suitable instrument, especially for very modest figures: for example, if we are dealing with a loan in progress below 2,500 USD it is more advantageous to ask for another loan at a rate zero to extinguish it, thus being able to obtain a reduction in interest.
Debt consolidation for bad payers
As we highlighted in the chapter dedicated to the requirements, those who are already reported as protested or bad payer have difficulty in accessing an instrument such as debt consolidation, due to the high insolvency risk. The only solution for those who find themselves in this condition
it is asking for a salary assignment, which is the only loan that can be financed as there is a guarantee of the salary or pension, and the amortization is done through direct deduction on the income received. But only those who are retired or have a permanent employment contract can access the fifth assignment. Alternatively, you can try to request consolidation through a third party guarantor of strong solidity and reliability.
When it is convenient to ask for debt consolidation
We have seen how to evaluate the convenience of this financial instrument based on the financial conditions applied that we can analyze in a loan estimate, and on the basis of the necessary amount. In general we can say that
Debt consolidation is useful when there are many debts with high interest rates, so combining all of them in one installment can effectively reduce the debt burden with a potentially lower interest rate.
It is important, however, make an installment calculation for evaluating the actual usefulness of the consolidation: for example, if the installment proves very high in each case, or come to the maximum limit of the amount between the percentage of installment and income, generally set at 30 to hundred, would be inconvenient. Furthermore, it must be borne in mind that the duration of amortization is very wide, and this leads to a lower rate but also an increase in costs over the long term. Furthermore, if in this large period of time further debts are contracted, the advantage of the single deadline to be considered in debt consolidation is also lost.
Debt consolidation undoubtedly has pros and cons like any product on the financial market: it seems trivial to say, but the ideal would be not to find oneself in the condition of having too many loans to manage together, and then resort to tools like this to avoid failing to support depreciation and end up in the register of bad payers. Debt consolidation is very convenient in some respects, but represents a burdensome commitment over a long period of time.
The advice is to always carry out a comparison of several loan consolidation debts to evaluate not only the rates applied but all the expenses and cost items present, such as commission fees, for the collection of installments, the sending of account statements annual, fiscal charges, insurance costs, and so on. And don’t forget the opportunity to explore other solutions, perhaps even with the help of a consultant, so as to choose the best solution for your specific problems based on the possibilities available.