Consolidation or merger of loans
Last year, according to the Czech National Bank, households’ debts climbed to almost CZK 1.5 trillion and this amount is constantly increasing. For individuals who get into a debt trap, there is often no way out, perhaps except for execution or insolvency. In 2017 alone, 1286 people declared personal bankruptcy and another 1,233 people filed for insolvency. Early credit consolidation is one way to avoid such a situation.
What is credit consolidation and why does it pay off?
Consolidation is the consolidation of all loans into one. The company you talk to consolidates will take over all your existing debts from both banking and non-bank companies and pay for them. You will only pay a monthly payment to this one company. This will reduce interest because they will not be split into several different loans at different institutions, and at the same time you will not be able to overlook one of the installments and forget to pay.
However, consolidation is certainly not a substitute for personal bankruptcy, nor is it the last rescue from execution. This is a type of loan, the approval of which, like most other loans, depends on your income, but also on how you repay your existing commitments.
Whom consolidation pays off and where to look for it
Consolidation is suitable primarily for people who have loans distributed among multiple financial companies and have to repay, for example, five monthly installments.
The second, when it comes to thinking about consolidation, is when you have a loan with only one company but under very unfavorable conditions.
One of the non-banking companies that provides consolidation, regardless of whether you have a loan from one or more companies, is Zonky, where you can earn interest rates on consolidated loans of as much as 3.9%, as well as Zonky offers interest based on the creditworthiness of a particular client. Another well-known non-bank company that offers consolidation of loans up to CZK 600,000 with interest from 7.87% is also Home credit.
However, choosing non-bank consolidations is quite wide, and as with classic online loans, it is important to spend enough time choosing the best solution for you.
Some companies may offer consolidation without a registry check, while others offer a merger of tradesmen or even pensioners. And from all this, as well as your creditworthiness, the interest offered.
What to watch out for when choosing a consolidation
Loan consolidation is the first step towards life without debt. Although it is a service that aims to help indebted people, we must not forget that it is still the same as any other loan and its main purpose is the profit of the company that offers it.
Therefore, as with any other loan, we should be careful to choose enough of the right company to commit our existing commitments.
Five-Step Secure Consolidation Basics:
- Find out the APRC loan, which in addition to interest includes all the other fees you pay for consolidation. Also, see if it’s really more profitable for you after consolidating your monthly payment
- See if it is a verified company. If you want a loan of hundreds of thousands, you should ideally use it with a trusted and stable financial institution. If there is hardly any information about it on the Internet and you feel bad about it on its website, put it away from it.
- Is the site transparent to tell you what your penalties are if you are late with an installment? Companies that have similar information usually have good reasons to do so.
- Does the selected company offer insurance against unexpected life events?
- Also, make sure that the company has a clear contract in which you don’t have to write any miniature letters or footnotes.
Non-bank loan consolidation is a great deal of debt collection, and if you follow the responsible lending policy, it can become a way out of a debt trap. But don’t get caught. First, calculate how much it will cost you and consider whether it really pays off.