Why a loan consolidation?
The loan consolidation allows some people to breathe new life, whether to avoid over-indebtedness, to react to sudden expenses, to finance a project or simply to afford some savings. It takes a weight off their shoulders by grouping all their monthly payments into one. They spend sometimes high amounts to settle over a short period to a single sum, smaller and to settle in the long term. This allows a more flexible management of their budget since they see their debt ratio reduced and their purchasing power increased. Thus, when negotiating another loan for a new project, they have a better situation that tends to reassure their interlocutors. In addition, organizations may refuse certain files considered unsound. But if one of them accepted your file, it is because your situation inspires confidence and can convince other organizations.
A long consolidation period mainly concerns people in emergency situations. Indeed, some may find themselves on the verge of over-indebtedness and wish to go through a loan buy-back before their situation is too unfavorable to be considered by the organizations in question. In their case, extending the consolidation period can reassure them at least initially with reduced monthly payments and debt ratio. With rising purchasing power, they are able to improve their situation little by little. For others, it is a question of reacting to an unforeseen as an accident involving new expenses that they can not insure because of loans already binding. Here too, the loan consolidation allows you to breathe in the short term to restore your health afterwards. But remember that in all cases, the purchase of loan increases your loan: the addition of your monthly installments plus any fees or notary fees or interest tax. Also, some organizations only support the consolidation of consumer loan and other real estate loans.
Example of a 30-year consolidation (360 months)
Take a customer who accumulated loans amounting to 75000 euros with 2143 euros monthly. If he subscribes to a loan consolidation that would increase his loan to 90000 euros with fees and taxes included, the monthly payment to be paid over 360 months will be 250 euros.
Why negotiate the consolidation term?
We must be very careful with the possibility of extending the consolidation period because it can turn against you. It should be remembered that the loan agency seeks above all to propose an offer and to accept a file likely to be profitable, and will therefore impose an interest rate or handling fees accordingly. It is for this reason that this interest rate will increase in proportion to the duration of your loan. From a moment, this arrangement could cost you more money than if you stayed in your original situation despite these lower monthly payments! So take a lot of precautions and negotiate your loan consolidation according to your ability to repay and not just your needs and desires. Also, if your situation is too critical and unstable in the eyes of the organization, it will refuse you the consolidation of loan because it will estimate that you are not able to make profitable its investment. You will have more trouble convincing if your debt ratio is more than one third of the amount of your income.
It should also be noted that longer consolidation terms are not necessary for everyone. Those in emergency need to oxygenate their budget in the short term but those who go through the purchase of loan to finance a project or put a cash aside are less concerned and can settle for longer consolidation terms. short. Have your financial situation checked to better assess your financing capabilities and set the right fair amount for this monthly payment. You can go through a broker but you can also use our online comparator that compares the offers of different loan consolidation organizations and helps you to see more clearly in the market.