Credit consolidation is an installment loan that makes it possible to combine several loans through a “repurchase operation.” In this way, there is only one monthly payment that can be adjusted by adjusting the duration of the payments.
Merge credits into practice
The merging of loans is like taking out a new loan to repay other loans in one go, as a group. It is therefore an installment loan, just like a personal loan, a car loan or a renovation loan. The difference with the latter is therefore the allocation of the loan amount, which will be used in this case to repay the other loans. Apart from the allocation and the interest rate, which can vary from one type of credit to another, the rules that apply to installment loans are also the most important here, namely:
- A specific amount is borrowed,
- That will have to be repaid over a predetermined period of time,
- And with a fixed rate and fixed monthly payments.
The benefits of credit consolidation
- There is only one monthly payment and one contact person left
- Possibility to take advantage of a better interest rate to reduce monthly payments
- Simulation & online request for free and without obligation
When is it interesting to merge your loans?
When you get a better rate
If the APR of loans contracted in the past is higher than that of credit consolidation, it may be worth considering this solution. It would then be possible to reduce the total amount of interest still to be paid and thus save money. However, this scenario is unlikely, since the interest rates applied for consolidation are generally higher than those for other consumer loans.
When you have trouble paying your monthly payments
Unfortunately, this situation is the most common reason for using a credit consolidation. It is not uncommon if you have already had to borrow several times before being overwhelmed by the monthly repayment charge at a certain point in time and you can no longer take it. In this case, the buy-back of the loans can make it possible to find a solution that restores a certain balance in accordance with the repayment capacity.
Reduce the amount of your monthly payments by grouping your loans
One of the objectives when consolidating different loans is to reduce the total monthly payments that you owe. It is not all by merging loans that makes it possible to achieve this goal. The key is to extend the duration of the credit. The term of a loan has a direct influence on the amount of the monthly payments. For the same sum of money borrowed, the monthly repayment amount will be lower if the repayment period is longer. The flip side of the coin is that with a longer period, the total interest that must be repaid in the long term will be greater. However, the small additional charge that must be paid in this case is a minor evil, certainly when difficulties arise.
Calculate the intended amount
To repay loans, it is necessary to have an amount in mind that corresponds to the total amount still to be repaid. For example, imagine the following situation:
You have 3 current loans:
- the remaining balance of your first credit is $ 6,000
- the remaining balance of your second credit is $ 3,000
- the remaining balance of your third credit is $ 2,000
- the total amount to be repaid then becomes $ 6,000 + $ 3,000 + $ 3,000 + $ 2,000, so $ 11,000.
In this example, the amount that should be borrowed would be 11,000 dollars. Please note, sometimes closing costs must also be taken into account.
Watch out for the closing costs of outstanding loans
When executing a redemption transaction, it is important to count the “closing costs” that are charged. The word “repayment” actually hides the fact of an early repayment, the terms of which are specified in the original credit agreement. This process generally leads to compensation from you to the lender. From a legal perspective, this reimbursement is limited to a maximum of 1% of the outstanding balance if the installments extend over more than 12 months and otherwise to a maximum of 0.5%.
Compare the credit consolidation in Belgium
- Simulation in parallel with different organizations
- Fast identification of the best interest rate
- Free and non-binding online application
To simulate a credit grouping, you must first calculate the required amount. It is quite possible to request a larger amount than the latter to obtain additional liquidity. By adjusting the duration of the repayments, the monthly payment can be reduced so that it is less than the sum of the monthly payments of the outstanding loans.
How does the credit consolidation tool work?
- First a simulation must be performed by calculating the required amount,
- Then make sure you select a quote that offers the best rate,
- You submit your application online on the website of the chosen lender,
- The lender analyzes the application and assesses the profile of the applicant,
- In the event of acceptance you will receive an agreement in principle and the contract,
- The contract must be signed and returned to the lender,
- The money is then transferred to the applicant’s account,
- The applicant can then pay off / repay his previous loans.