Debt consolidation is a type of loan that allows you to combine all the installments of other loans in progress in a single lighter monthly installment, thus giving the possibility of extinguishing all the other debt positions, due to loans disbursed by the same bank or other credit institutions.
The extinction of all loans in progress, grouped in a single new installment, thus makes it possible to lower it and avoid the risk of insolvency. This operation is used to avoid the over-indebtedness of people and families who have accumulated more loans over time and who find themselves, in the same time period, having to pay too high installments, all bearing on the same income. The amalgamation of the installments into a single one, therefore, entails two advantages
One linked to the payment of the installments themselves from an administrative point of view. No longer many postal bills (and related expenses) but a single one.
The other, fundamental, is the reduction of the overall installment, due to the possibility of obtaining better rates than those of the original loans and, above all, extending the duration of the new loan compared to that of the single merged entities, also having the possibility of obtaining liquidity additional.
When to apply for debt consolidation
Debt consolidation, we have said, represents a valid help to reduce the risk of over-indebtedness and to manage monthly expenses and outgoings in a simpler way. It can be requested at any time or in any case from the moment in which the customer finds himself in difficulty in managing the various deadlines, risking incurring possible delays or oversights.
The practical example is this: if we have contracted three loans (one for the car, one for a trip, one to have liquidity) we combine them into a single one whose installment, however, must be less than the sum of the three. Among the systems to consolidate other loans in progress, there is the loan with an assignment of the fifth which easily allows the public, state, and retired employees to request debt consolidation, even if they have been reported as bad payers.
On the other hand, it is impossible to request re-financing in situations of extreme economic difficulty, i.e. without income and without a guarantor. However, depending on the amount needed to pay off the debts of the loans already taken out, it may be more appropriate to opt for a debt consolidation loan that allows access to larger sums. In this way, it is possible to benefit from longer amortization plans than the canonical 120 months provided for by the loans and to access a repayment plan of up to twenty years.
In the face of more liquidity and a longer duration of the contract, however, it will be necessary to provide appropriate collateral, such as the registration of a mortgage on the house owned.
Advantages offered by debt consolidation
In addition to the advantages described above, debt consolidation allows you to obtain additional liquidity, to be allocated to other needs. In addition to combining the installments of the various loans in progress in a single lighter monthly installment, this loan allows you to access more advantageous contractual conditions, such as:
More advantageous interest rates.
A longer-term amortization plan.
A lighter repayment installment.
Who can apply for a debt consolidation loan
The fundamental element to be able to request this type of loan is the existence of debts already contracted with other financial companies. If you are exposed, but the ability to prove that you will be able to pay remains, then you can proceed with the request for a loan.
Once you have found the credit institution that provides this product, you must follow the same procedures normally provided for the disbursement of loans.
In general, the granting of loans for consolidation is not subject to the presentation of collateral (i.e. lien or mortgage rights on the assets owned by the applicant). We are often led to believe that refinancing is the right solution for those in situations of extreme financial difficulty, but obtaining debt consolidation without a paycheck and without a guarantor is not possible. Those who are unemployed or do not have forms of guarantees will hardly be able to obtain a loan of this type.
To apply for a consolidation loan, you must be between the ages of 18 and 75 and have a permanent employment contract, with a seniority of at least 6 months for employees and one year for the self-employed. In addition to workers (employees, self-employed, and freelancers), retirees can also apply for this type of loan.
The necessary documents
Personal data: personal document and tax code.
Income: copy of the last paycheck or pension slip. If you are self-employed, a copy of the latest Unico model is presented.
Documentation relating to the loans to be replaced with the new one requested such as the extinguishing account.
What guarantees to apply for a loan with debt consolidation
In addition to income, to protect themselves from the risk of insolvency, in some cases, some credit institutions may request ancillary guarantees.
The most common form of guarantee is the signature of a guarantor or third party guarantor, who assumes responsibility for the repayment of the sum disbursed. This solution is adopted in the event that it is a particularly large amount or, in the event that the applicant does not have recent seniority or, again, has had some small payment problem with the loans that he intends to consolidate.