A favorable loan should be a clear goal for everyone. But not always people actually have the kind of loan that is currently the best. This is influenced not only by the overall disadvantage of the loan at the time it was applied for, but also by the development of the economy and interest rates. As a result, many loans currently appear to be quite disadvantageous.
Can they be favored? Definitely yes. There are two ways that are actively offered. The first is called refinancing and the second is called consolidation. What is the difference between them? When to choose? And what should the options bring? Look with us.
Check out how to consolidate payday loans online
The primary selection procedure is the same as for refinancing. You can choose from the offer of banks as well as from the offer of non-banking companies. Furthermore, the benefits related to interest, APRC, and the set repayment schedule cannot be neglected. In some ways, however, consolidation is different. The right thing is to be able to transfer to another provider all the loans you have that are disadvantageous. What should they be?
- Special-purpose and non-purpose consumer loans
- Overdrafts or revolving loans
- Credit card debts
Need payday loan help? The right payday loan consolidation provider should be able to combine your payday loans.
How does refinancing and consolidation differ?
Many people are still unclear about this. Let’s look at the basic division of both options. This is the only way to know the right way to go. When it comes to refinancing, we are talking about shifting one single loan to another provider. The main goal is to reduce interest, but there may be a change in the repayment schedule. This option is suitable for those people who have only one loan, which is disadvantageous, and just want to give them an advantage.
Consolidation can do even more. It is aimed at those clients who have several disadvantageous loans that want to benefit. In practice, this is done in such a way that all obligations are combined into one, which is subsequently repaid to another provider. In addition to the reduced interest rate, this can also bring other benefits to clients, such as:
- Reduction of administrative burden – monitoring of individual deadlines
- Reduction of monthly installments
- Reduction in total installments
How to choose the right refinancing?
Let’s go to specific tips, as this is the only way to ensure that the current loan will actually benefit from it. Both banks and non-banking companies will offer refinancing today. It is up to everyone what path they choose. Similarly to the classic loans, here also applies to non-banking companies awaiting simpler terms of transfer, and at the bank a lower interest rate. The advantage should be the main motivation. Where there is the lowest interest rate and the lowest APRC, ask about the possibility of refinancing.
The future payment schedule should also play a role. Primarily, the repayment should suit your budget, without undue constraints. It is also a good idea to choose a bank or non-banking company that will handle all administrative formalities for you. This is a plus that will be appreciated mainly by busy people.
Extra money may be an attraction
Both the refinancing and the consolidation will lead to the termination of the original loan product and a new loan. In connection with this, many providers offer clients the opportunity to get extra money. They can not only transfer the loan or loans, but also have the opportunity to get an extra amount. This will, of course, be added to the total volume of funds transferred and will bear the same rate as those transferred. Anyone who manages to pay their obligations and would like to have some extra money does not have to create a new credit product, but can simply get the required sum of money. How big it will depend on the specific creditworthiness of the client.
When to refinance or consolidate?
Many people often talk about refinancing a mortgage with clear terms. They are associated with the so-called fixation and the period when it ends. However, there is no fixation for ordinary loans of any type mentioned above. It follows that both refinancing and consolidation can be realized at any time. It is enough to find out that a competing bank or company offers more advantageous rates and it is already possible to request mergers and transfers. In addition, let us remind you that both do not have to be realized only once. Some loans are repaid over a number of years, during which time developments in the lending market may lead to further benefits. This can be used and thus can be favored several times. The main clue here is one single piece of information – it has to pay off.
What do I need to benefit from loans?
These are two important things. The first thing concerns all administration. If you ever took out a loan, it was linked to a number of documents that you signed and received. It should be in its own interest to keep this documentation. This is also because you will use it right now when you decide to consolidate or refinance. Your bank or non-bank company will want to deliver the documents to you. If you do not have them, there should be no problem getting copies directly from the original provider. This may take some time and may not be free.
It is also necessary not to be in delay. Although the exceptions are linked to the possibility of individual assessment, this is not recommended. Both because your loan transfer request may be rejected and your overall creditworthiness may deteriorate. It is strongly recommended that you settle your defaulted commitments before setting out on an expedition. Related to this is the fact that if you expect problems, it is good not to hesitate even a day. With a new provider, you can ensure a lower installment and the certainty of trouble-free payment.
These types of loans are no problem to merge
Bank consumer loans
They are a typical representative of the loan segment. Bank consumer loans are characterized by the fact that they can be provided in tens or hundreds of thousands of crowns. They can be both purpose-built and non-purpose-built. However, it must be said that for many, interest rates are so good that their consolidation may not always pay off. It is good to consider the future offer thoroughly and think about what it can bring. At the same time, it is necessary to say that there are also banks that still lend at a relatively high interest rate and it is clear that consolidation pays 100%.
Non-bank consumer loans
They are a clear competitor to the banking ones. If we are to look at their characteristics, in terms of the financial amounts offered, these are similar options. The same is true with regard to the possibility of using money, where we can talk about the purpose variant, as well as the non-purpose variant. The advantage of the non-banking segment is often the more benevolent acquisition conditions. On the other hand, there is no exception that it can be associated with relatively high interest. In this case, consolidation alone can really pay off.
P2P consumer loans
In theory, P2P consumer loans (loans from private individuals) can be categorized in the non-banking segment, as the main provider here is not the bank. On the other hand, the provider is not even a non-banking company. Everything works much more sophisticated. That is to say that a specific application for funding consists of ordinary people who invest their money in this way. In this segment, the most common talk is about non-purpose loans, usable for anything. While P2P loans often attract low interest rates, they are not always a reality. It may not be an exception that it is approaching twenty percent. Such a loan may already be advantageous to include among the consolidated ones.
Do not confuse them with debit cards, as this option is directly linked to your bank account and your withdrawal options depend on your balances. In contrast, a credit card is a classic credit product where you start with zero and then draw to minus. Today, credit cards are quite popular as they can offer:
- Interest-free period
- Discounts and refunds related to purchases
- Free management
But not everyone can make their credit card. If interest becomes charged, it is not pleasant. Credit cards generally belong to the group of the least favorable credit products. Therefore, their consolidation is also appropriate. In practice, not only are credit card debts paid, but also canceled. We speak plural, as a particular person may not have only one card, but may have more. Today they are issued by both banks and non-banking companies.
Credit card as a way to debt trap – what are its negatives?
It is a purely bank loan. An overdraft can be thought of as an authorized overdraft. By default it is not possible to drop below zero. However, in case of overdraft approval it is possible to draw so-called minus. And up to the amount that is approved in the form of overdraft. Those who do not smoke the commitment can get into a situation similar to that of a credit card. Here, too, there is a need to pay regular repayments, as well as very high interest rates, which are definitely not exceptional in overdraft loans. Here, too, we can say that consolidation can definitely pay off.
This is a relatively specific type of loan. It can be said that it is a combination of a special-purpose loan and a long-term lease. Leasing is most often used to finance a car. Most of the time this is a type of loan that is intended for businesses, but this does not necessarily mean that a private person could not obtain it. If its conditions are disadvantageous – that is, if the interest rate is high, it should be said that consolidation can also be a good choice here.
Only loans that are honestly and regularly repaid
You already know the main overview of what types of loans can be consolidated in banks and non-banking companies. Finally, we have to add one very important thing. And such that it is possible to consolidate only those loans for which you are not in default. It is the regularity of repayment of installments that is one of the main conditions for allowing consolidation. Different types of loans can be combined, as well as different numbers. However, it is not necessary to be in slip. As for the maximum amount of merged loans, everything is limited only by the particular provider. Exceptions need not be hundreds of thousands, even sums close to the threshold of one million crowns.