Consolidation is a way to pay off your debts in an easier way because instead of making several minimum payments in different accounts, you will get a loan to add and cover all your other loans in a single installment. This strategy will make you live more relaxed, but why? In this article we will tell you:

You will simplify your payments

Making a Payment With a Debit CardConsolidation is an ideal strategy if you have several debts because it will unify them and you will make a single monthly payment. Instead of being pending of several dates of payment you will only be pending of one.

More than the minimum payment

When there are several debts, we often pay only the minimum, which implies higher interest payments and a longer time to pay off those debts. What you will achieve with consolidation is to avoid increasing the duration of the debt and the interest that this entails.

Good credit record

If you pay your debt consolidation credit on time, you will avoid any damage to your credit history, so we recommend that you keep the payment date in mind

Tips that you should keep in mind to consolidate your debt

  • Verify that the bank in which you will carry out the consolidation is reliable, has support and provides you with all the information you need to clear all your doubts.
  • Inform the bank that you will need the credit to consolidate your debt so that they can offer you a solution adapted to your requirements, needs and financial capabilities.
  • Request the time in which you consider that you will pay off the debt, in this way you will not risk your peace of mind or your personal finances.
  • Take advantage of the experience of bank agency executives, as they will be able to advise you on the most viable option

Consolidating your debts will make you live more relaxed because instead of having different loans or credits with different interest rates and payment dates, you will unify them all and you will only have to keep a record.

Debts with your credit cards?: Unify them with a financial institution.

Man in Gray Blazer Holding Blue Denim JeansCredit card debts are the most common among users. It is very easy to get out of control and spend more money than we have

If you have different credit cards that you owe money to, consider exclusively consolidating these types of debts into a single loan.

This means that they lend you money to pay those debts and now you will only have a single installment in your pending payments for the month, corresponding to the loan.

How to avoid more debt in the credit card?

  • Do not use them unless necessary: ​​such as in basic products, emergencies or accidents when you have no money. 
  • Don’t fall for impulsive purchases: nothing outside the planned budget.
  • Pay your installments on time and prevent the debt from growing due to interest on arrears. 

Difference between consolidating and refinancing debts

When you refinance, the bank can change some conditions (such as interest rate or term) to achieve lower installments that are more comfortable to pay. 

When consolidating their credits, the person agrees with a single instalment less than the sum of all the payments made per month. This can occur as a result of a lower interest rate or the extension of the financing term.

To put it another way, when the bank offers debt consolidation, it is proposing to buy the loans that the debtor owns with other institutions. Thus, you win a new customer, providing you with better credit conditions.

Advantages Of Debt Consolidation

There are several advantages of debt consolidation. First of all, it is useful when faced with short-term liquidity problems.

Likewise, unifying the loans allows for greater order. Instead of having multiple instalments with different due dates, there will now be a single disbursement that can be strategically scheduled.

If I receive my salary on the 15th of each month, an ideal date to pay the bank would be, for example, every 16. In this way, I am reducing the risk of running out of funds to meet my obligations.

An additional advantage of debt consolidation is that some financial institutions offer a grace period. That is, the individual can unify their credits in April and schedule the first instalment of the new loan for July. Thus, for three months, the user will not have to make any payment to the bank.

Disadvantages Of Debt Consolidation

One possible downside to debt consolidation is the increase in total expenses. This will depend on the debt period (which may have been extended) and the interest rate set by the bank for the new loan.

Therefore, it is important to calculate the total disbursements until the end of the financing period.

Debts often drown many, so a feasible alternative to lessen financial commitments is debt consolidation.

Analysis

Take an inventory of all, yes, ALL of your debts, no matter how “small” they may seem. Verify conditions according to the contract of each of these, that is, balances, interest rate, fees, etc.

Introspection

Check your credit record, check that each of the debts contracted in the past is officially paid off. That is, you have the settlement letters issued by the respective bank. If there is any irregularity, it is best that you approach the bank to file a formal claim.

Payment

If your credit history is in order, you should analyze how much the monthly payments will amount to when carrying out the debt consolidation; Check the percentage that it will occupy of your monthly income and if you will have enough left for primary expenses (food, health, education, etc.). When unifying the debts, look for a lower instalment than what you currently pay, but that is not in such a long term that it could make you invest more of your money in interest.

Conditions

Before signing the debt consolidation contract, read its restrictions and terms. Corroborate the itemized fee, that is, how much the insurance payment, interest, capital payment will amount, if there are no suspicious charges, etc.

Calculation

Once you have made the decision, do a restructuring of your budget. Be aware that it is vital to organize your money inflows and outflows; Refocus your expenses and savings, limit yourself to discretionary expenses (non-essential goods or services) and take care of Ant Expenses. Having more money on hand will give you greater stability and financial security; it will also help you have an emergency savings fund.