Tips for a payday loan consolidation
Consolidating payday loans is an increasingly common option. Thousands of people have realized that consolidating payday loans can be the ultimate solution to reduce your monthly spending by paying credit. Read more at our PaydayLoanConsolidation blog.
There are many Portuguese who have chosen to consolidate several small payday loans.
At one point, the tricky thing is to continue to pay the installments of all the credits taken. When the payment of the obligations associated with the payment of credits becomes unsustainable, consolidation is an option to be taken into account.
For those who choose to consolidate personal loans, the goal is almost always the same: to get a bigger margin to manage the family budget each month. However, what happens almost every time someone chooses to consolidate credits is that at the end of the loan, they end up having to pay substantially more.
Credit Consolidation: Attention to Spread
If you consider consolidating personal loans with your home loan you should look closely at the new conditions proposed by the bank. In most cases, banks do not allow consolidation without increasing their profit margin.
Thus, the customer has to start trading knowing in advance that the bank will seek to increase the spread. A considerable increase in the spread will result in higher interest payable and in many cases, this increase may be significant.
It is up to each client to try to avoid that the consolidation of credits does not result in a small decrease of the monthly payment and in a great increase of the interest to be paid.
What do you have to do to prevent the spread from rising to levels that will damage your pocket? Well, in fact, the only option is to negotiate and always have several options in the portfolio.
If you have more than one proposal to consolidate credits on hand, you will gain negotiating power and it will be easier to get a reasonable deal. If you do not do your “work from home” in advance and you contact your financial institution without any other proposal in the portfolio, then the most certain thing is to have to comply with the conditions imposed by the lender.
Other Care When Consolidating Credit
Before choosing to consolidate personal loans should take into consideration the index associated with the mortgage loan. Most personal loans have fixed interest rates, while home loans are generally indexed to Euribor.
It is true that interest rates are now at record lows, but experts are forecasting a 1% rise in the near future, which may make consolidation no longer pay off.
Another point that you should check before consolidating personal credits is to inquire about the commissions for early repayment that you will have to pay. In some cases, these commissions are sufficiently relevant to prevent them from choosing to consolidate.
The assumption that consolidating personal credit always pays off is wrong. In fact, in some situations, consolidation may be disadvantageous and may lead to a generalized increase in the cost associated with credits.
Tips For Anyone Who Thinks To Consolidate Credit
- Talk to your bank. Your first step should be to get in touch with your bank and try to renegotiate the terms of your loan. If, for example, you can negotiate new housing loan terms, you can get the margin you are looking for in your monthly budget. This renegotiation can be much more advantageous than the consolidation of credits, so start here.
- Choose mortgage credit. When trying to consolidate credit, choose mortgage credit if that is possible. DECO advises consumers to opt for this type of credit, to the detriment of consolidation through personal credit.
- Do not hesitate to ask questions. Before consolidating personal credit do not hesitate to ask questions. Look closely at the Annual Effective Annual Rate (APR) and the Annual Effective Rate (APR), as these rates will determine the overall cost of credit. Remember that only you can safeguard your interests.
- Compare options. Do not accept the first proposal for the consolidation of credits presented to you. If you really decide to move to this solution, ask for more proposals from other financial entities and compare all your options.
Think Before You Go For Consolidation
Some funders present consolidated credit as a fairy tale, as a perfect solution for anyone who is struggling with multiple credit hiccups.
Remember that consolidating personal credit is a decision that can result in an immediate gain in terms of liquidity, but in the long run, it ultimately results in paying more interest.