What are you waiting for? Request consolidation loans to pay off payday loans now
The combination of payday loans into one lower installment is undeniable convenience and a way to organize your home budget. But is it really a cheaper solution in general? To answer this question, we look Consolidate loans with Helpers under the microscope.
Nowadays, it’s easy to get lost in the thicket of serviced commitments. A loan for a TV set, a loan for a trip, an installment for a car, and an unpaid credit card limit. For this fee for a flat, internet or telephone subscription. Any delay in repayment of liabilities results in penal interest, and in the case of loans, delays are also recorded in the Loan Information Bureaus, lowering our credibility in the eyes of banks. When servicing credit installments gets out of hand, you should think about debt consolidation.
The magic of one installment – how does the loan consolidation work?
A consolidation loan is a solution that allows you to combine your existing debts into one commitment. This operation allows you to operate one installment, which is usually lower than the sum of previous loads. This allows both to organize the home budget and improve the current financial liquidity. The big advantage of this solution is the ability to consolidate almost all types of bank loans – from cash to mortgage.
The decision on the combination of debts should be preceded by a detailed analysis of the structure of its liabilities. There is no obligation to combine all of your loans with each other. We may pay off some liabilities on preferential terms and it is not worth “wiping” them with other loans. All these conveniences and the flexibility of the described solution naturally lead to the question – where is the catch?
Extended loan period
For the lower amount of the consolidated installments, contrary to appearances, there are no spells. This convenience results directly from the extension of the funding period, which automatically translates into a reduction in the amount of the monthly installment. However, there is another dark side of the coin. The longer repayment date is the increase in the total cost of the loan. For those who are only looking for a way to organize their finances, it will be a reason to think about the profitability of the entire project.
In the face of an extremely unfavorable price difference, it is worth thinking about simpler, but less expensive solutions. One way to do this is to set up standing orders. Thanks to them, liabilities will be automatically regulated at specific time intervals. Unfortunately, this method will only work if the amount of cyclic loads is constant. The increase in the total cost of credit will be assessed entirely by people at risk of losing current financial liquidity. For them the most important thing is to reduce the current amount of liabilities.
Choosing the right consolidation loan offer
When the decision to use the debt consolidation has already been made, the time has come to verify the offers of individual banks. It is worth devoting the time to it, because the differences between offers can reach up to several percent, which in the long-term repayment can bring noticeable savings. When analyzing the options available, take the viewer:
- commission for granting a loan – it is not worth the magic of a lower installment. It may happen that due to the high commission, debt consolidation will be unprofitable,
- APRC – Actual Annual Interest Rate is used for efficient comparison of offers. This percentage expressed in the index includes additional costs related to the commission or insurance. However, it does not take into account the costs associated with the need to set up a personal account or credit card. For this reason, the analysis of the APRC should be supplemented with the verification of the total amount to be repaid,
- total amount to be repaid – in line with what we wrote earlier, this amount will exceed the sum of costs related to servicing existing liabilities. This is due to both the extension of the loan period and the need to pay an additional commission. It is important to choose an offer that is characterized by the lowest increase in costs,
- repayment period – allows you to assess how long we will pay off the liability in the new model,
- the amount of the installment after consolidation – the burden expressed in terms of the amount gives the best idea of what our budget will look like, reduced by a lower installment,
- penalties for failure to comply with the contract – you should check what consequences we will incur as temporary problems with the loan service. The penalty may be, for example, increasing the interest rate or even terminating the contract, which results in the necessity of almost immediate repayment of the obligation.
- Additional collateral – better financing conditions (lower interest rate or commission) can be provided by collateral, eg a third party guarantee or a mortgage on an unencumbered property.
Is it worth using the consolidation of loans?
A consolidation loan is, at first sight, a number of undeniable advantages. However, it should be assessed whether combining debts is dictated solely by the desire to arrange the repaid liabilities, or is also to improve the financial condition of the debtor. In the first case, it is worth checking how much the market priced the convenience of servicing one installment and decide whether this solution fits in with our capabilities and expectations.
In turn, people forecasting upcoming financial problems should be interested in consolidation before the first delays in payment of installments arise. Otherwise, the bank may not agree to consolidate liabilities, bearing in mind the increased transaction risk. In such situations, only individual negotiations with the creditor remain, and these can be time-consuming and difficult.