When we decide on a home loan, we cannot predict what our future will look like in five or ten years. We take some risks. The loan often comes with other liabilities, such as installments for home appliances or electronics, smaller loans or credit card debt. At some point, we come to a situation in which we are unable to pay all liabilities on time. It doesn’t have to be this way, but unfortunately it often happens. We are looking for a solution and we often take out new loans only to, at least partially, pay off the current debt. We are winding up the spiral of debts, which is starting to absorb us, and yet there is another solution – credit consolidation.
What are we talking about?
Speaking of loan consolidation, we mean reorganizing our existing liabilities and converting them into one loan with lower installments. It works in such a way that in practice we take another loan, however, it is allocated by the bank to repay our remaining debts. We do not have to worry about them and we pay only one installment per month. As a rule, it is smaller than previous commitments, so that we can cope with it. Importantly, the money from the consolidation loan does not go to us, but to our creditors. We must remember that this is not a free solution. We will pay a commission for taking out a new loan, and above all, its final cost will be higher than our previous commitments. The repayment period will also be extended, all to guarantee lower installments.
Let’s think about it
Loan consolidation is not an ideal solution, but in some situations it can pull us from the financial divide. It is worth considering consolidation before we take another loan just to pay off the previous one. Each bank offers this type of loan and if we try, we should get a consolidation loan without major problems. We should remember to choose reputable banks that operate fairly and transparently.
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