Debt consolidation -It’s quick and easy to get the best debt consolidation loans

It’s quick and easy to get the best debt consolidation loans

What exactly is a consolidation loan?

Debt consolidation allows you to combine all your installments and pay off only one. So if it’s difficult for us to remember when to pay back which loan, announced that it’s worth considering the best debt consolidation loan option. Combining debts is also a good solution for people who want to finally pay them back, and this is only possible after reducing the sum of monthly installments, which also enables consolidation. 

As a result, it will be a smaller monthly burden on the household budget, and the funds saved in this way can be used for savings. Due to this, there is a good chance that our financial situation will improve in the near future.

In general, this type of loan is granted to pay off our other obligations. However, we do not get money in hand, the bank settles these obligations for us, transferring all the debt to itself.

For the consolidation to make sense and give the customer lower installments that are easier to pay back, the loan period must be extended. Therefore, several loans with a repayment period of e.g. 3 years can be converted into one loan with a loan term of e.g. 8 years. Thanks to the extension of the loan period, the amount of the loan installment will decrease.

A consolidation loan with additional cash

It is possible to choose available funds for the consolidation loan in the form of cash, which the customer can use for any purpose, e.g. vacation or renovation of an apartment. This is a good solution because in one go we will get rid of several loans, turning them into one and get additional funds. An additional advantage of such a solution may be the fact that consolidation loan offers are usually granted on better terms than cash loans for any purpose.

What to look for when taking a loan

What to look for when taking a loan

In addition to extending the loan period, the consolidation loan should meet several conditions in order for it to pay off. Namely, compared to our current loans that will be consolidated should have:

Lower interest rate – The interest rate is one of the most important parameters when it comes to the cost of credit.

Example: With a difference of 1% for USD 50,000 and a loan term of 8 years, the installment difference is about USD 30. So, for the whole loan period, we can save about USD 2,880.

No insurance – Credit insurance is income for the bank and at the same time an additional cost to be borne by the customer. It is usually voluntary. However, if you would like to have additional insurance, it is worth buying it on the free market, because it will come out cheaper than what the bank offers.

Lower commission – Currently, you can find several offers without commission, but these are individual cases. You need to look for offers where the commission does not exceed 10%. Higher commissions will significantly increase the amount that will have to be returned to banks.

Earlier no-fee repayment – Currently all consumer loans can be repaid ahead of time, with no additional fees. This is a good solution if you have free funds and you can pay them back in full or get an overpayment. By using this maneuver you will save on interest.

APRC – Annual Real Interest Rate, which is the most reliable parameter thanks to which we can determine the cost of the loan. If you want to compare several loan offers, pay attention to the APRC, the lower the better for you.

Insurance return

When consolidating a current loan that is insured, you can count on your insurance refund for the unused period. In most cases, you have to ask the bank for such a refund after having paid back in advance. It is worth remembering this because, with higher amounts of credit, amounts of several or even several thousand dollars are at stake.

Where is the best place to take a consolidation loan?

There is no unequivocal answer to this because the offers of banks are changing, there are promotional offers.

Before deciding to take out a loan, it is worth analyzing the offers of several banks and recalculating the costs we will incur in the whole settlement. Particular attention should be paid to the APRC of the loan because this parameter best illustrates the offer.