Free access to credit programs result in unlimited credit numbers. Banks and non-banking institutions issue loans with different repayment terms. Not only the loan amount or the repayment term differ, but also the interest rates.
An increase in the payment burden due to the simultaneous execution of several loans provokes untimely debt repayment due to banal forgetfulness or temporary financial difficulties. To avoid late payments, while keeping a positive credit history, a loan consolidation procedure is provided.
Loan consolidation is a set of banking measures to combine several loans and credits into one. The ultimate goal of using consolidation is to reduce the burden on the payer. After consolidation, the loans are combined. Instead of several small payments, the debtor undertakes to make one monthly payment to pay off the debt.
Loan consolidation banks can offer:
Debt consolidation is not always included in the list of services provided by financial organizations. This method of revising credit terms is widespread in Western countries, where intermediary companies are involved in debt consolidation.
Banks usually use loan consolidation as part of the refinancing procedure. This approach of debt management allows you to revise the repayment terms of multiple loans, simultaneously combining them into one loan with an updated repayment schedule.
Consolidation of loans is available to adult clients with a perfect reputation and stable income. The bank has the right to demand identity documents, confirming income and proof of borrower’s employment.
You can consolidate debts that have formed as a result of the use of credit cards, consumer loans or microloans. As a rule, a consolidation of no more than 5 existing obligations is allowed. The parties agree on the terms of the new deal individually without involving the original creditors.
As a separate service, consolidation on favorable terms can be offered by a bank that works with a client under several lending programs.
For example, if a consumer loan and a credit card are issued at the same time at a financial institution, debts on these banking products can be combined.
Before signing an agreement to consolidate debt or deciding on such a step, the borrower needs to carefully prepare. Reckless use of banking services can significantly worsen the financial situation.
The borrower is recommended to:
Before applying, you need to consider:
Debt loan consolidation steps may differ depending on the bank and the type of procedure chosen. For example, in the case of using collateral, you will have to provide information about the property selected to secure the transaction. In any case, having drawn up a loan agreement, the debtor will be forced to pay off one large loan instead of several small loans.
The decision to consolidate loans at the initiative of the client is made by the financial institution to which the application is submitted. No early repayment of loans is required from the original lenders. As a result, having studied all the subtleties of the procedure, the borrower will be able to increase the chances of making a deal with the most favorable terms.
Reasons for declining consolidation requests:
To increase the percent that your request will be approved, you should look at the reasons for the rejection. As a rule, applications are rejected due to typos or non-compliance of the client with the bank’s requirements. Having corrected the mistakes, the application can be resubmitted.