A consolidation loan is used when the borrower wants to combine several loans into one. What exactly is consolidation and when is it worth using a special-purpose loan?
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Are you looking for a way to get out of payday loans? A payday loan consolidation, which redirected here is a product created with you in mind. Below we have prepared a list of the most popular loan offers for 2019. The parameters given are for information only. The amount and terms of the loan we can count on depend mainly on our creditworthiness. The higher the bank scoring, the greater the chance for a cheap loan.
Consolidation loan – what is it?
It is a solution that will avoid delaying the repayment of a loan or credit in a situation where one person has taken on too many obligations. Consolidation means combining smaller cash loans or loans into one debt. Thanks to this operation, the customer has only one loan, whose installment may be smaller than the sum of several individual receivables.
It all depends on what conditions we agree to and how long the loan period will characterize our new commitment.
Some customers take on a large number of payday loans and loans to build a positive credit history. However, due to a poorly performed home budget analysis, they can quickly lose it. Then consolidation is a good option.
There are two types of consolidation loan:
- cash consolidation loan,
- mortgage consolidation loan.
How they work and how they differ – more on this in the next parts of the article.
How a consolidation loan works – a special purpose loan to pay off other liabilities
Simply put, a special purpose loan is a loan to pay off other loans. Virtually all liabilities can be combined into one, regardless of whether they are banking or non-bank products. However, it depends on the offer of the institution chosen by the client. How to take a special-purpose loan?
Consolidation can be done with a bank or a loan company or alone. In the case of banking and non-banking institutions, the customer then uses a specially prepared consolidation loan offer. However, if he wants to cope with the merger of liabilities on his own, he simply takes a loan (depending on the amount of debts) to repay the obligations already incurred.
It settles itself with all creditors (banks, loan companies, private persons), and then repays one installment of a commitment specifically made for this purpose.
Until recently, consumers could only consolidate loans and other liabilities that were contracted with banks. At present, however, some loan companies offer consolidation, which means that to combine payday loans and installment loans into one, you don’t have to do it yourself.
What to look for when taking a consolidation loan?
Consolidation, like any loan, involves certain repayment conditions that must be carefully checked before signing the contract. What elements that make up a consolidation loan commitment are important to the borrower?
- Installment after consolidation – specifically its amount,
- commission – lenders usually require a commission for granting a loan,
- APRC (Actual Annual Interest Rate) – the cost of taking the loan, but does not include additional fees,
- the total amount to be repaid – it should be as low as possible, but it should be borne in mind that it will eventually be greater than the sum of previous liabilities,
- loan collateral – what collateral the bank approves, e.g. a mortgage consolidation loan can be secured by a mortgage,
- late repayments and the consequences thereof.
Before the customer decides to take a consolidation loan, he should also check the bank or lender that he wants to apply for. An example of why this is so important is the bad financial situation of the Wonga loan company in the UK – the company is currently considering insolvency. However, as the press office of the Polish branch of Wong convinces, in Poland “Wonga works normally (…). Nothing changes for customers. “
Meteor Bank – consolidation loan
At Meteor Bank, you can consolidate loans that are banking products. The offer of this bank is distinguished by additional cash for new expenses, which is transferred along with the loan amount. A loan at Meteor Bank can be taken in one day without leaving your home – all formalities are handled during a telephone conversation and the funds are transferred to the account within one day (if the customer is financially reliable).
Meteor Bank – consolidation loan terms:
- interest rate: 5.9%,
- amount: max. 200 thousand zł,
- loan period: minimum 6 months, maximum 144 months,
- APRC: 7.57 percent
CreditCole – consolidation loan
By consolidating with CreditCole you can combine as:
- loans from other banks,
- credit unions loans,
- installment loans,
- cash loans,
- car loans,
- credit cards,
- loans in a personal account into one.
Repayment of the consolidation loan can be spread over 120 installments and you can also get extra money for other expenses. CreditCole recommends coming to the bank with your spouse or other person to get a larger loan amount.
CreditCole – consolidation loan terms:
- interest rate: from 5.49 to 10 percent,
- amount: max. 255 550 PLN,
- loan period: maximum 120 months,
- APRC: 12 percent
Millenial – a consolidation loan
Millenial offers a mortgage consolidation loan and consolidation loan. Offers vary, details can be found on the lender’s website. In the case of a consolidation loan, the borrower is entitled to credit holidays once a year.
Millenial – terms of consolidation loan (mortgage)
- interest rate: 4.2 – 4.5%,
- amount: max. 180 thousand zł,
- loan period: minimum 3 years, maximum 30 years,
- APRC: 5.7 percent
Portel Bank – consolidation loan
This bank offers a consolidation loan. The lender is distinguished by the fact that customers do not incur costs for earlier than the agreed repayment of the liability. You do not need to have an account with Portel bank, but to get a consolidation loan there. In addition, the bank gives extra cash up to 25 percent. loans repaid for any purpose.
Portel Bank – terms of the consolidation loan:
- interest rate: approx. 9% (variable),
- amount: minimum 1 thousand PLN, maximum 120,000 zł,
- loan period: from 1 to 120 months,
- APRC: 11.6 percent
Money from this loan can be used to pay off other loans and advances that are transferred to Portel Bank from other banks and credit institutions. Credit holidays at Portel Bank mean that you can suspend the repayment of the consolidation loan for up to 3 months.
mYBank – consolidation loan
At mYBank, you can consolidate cash, car, revolving, installment and credit card liabilities from other banks.
- interest rate: from 8.79 to 9.89 percent,
- amount: up to 180 thousand zł,
- loan period: maximum 96 months,
mYBank offers customers additional cash for any purpose in the amount of up to 100 percent. balances of consolidated liabilities.
More information on consolidation loans and loans can be found on the banks’ websites. There are also representative loan costs and interest rates for specific amounts – the above costs are indicative.
Cash consolidation loan and mortgage consolidation loan
There are some differences between these products that are relevant in determining the purpose for which the commitment is being made.
The cash consolidation loan is distinguished by the fact that:
- while taking it, the customer may receive additional cash – the purpose of its use is any,
- its maximum amount is tens of thousands of zlotys (depending on the institution) – so you can say that it is a product that consolidates cheaper liabilities.
A mortgage consolidation loan is distinguished by the fact that:
- offers high amounts to take – the amount of the consolidation loan in this case limits the value of the property that is taken under the mortgage,
- the interest rate is lower than in the case of cash loan consolidation,
- the loan is secured by a mortgage.
Consolidation – pros and cons
A loan that combines several liabilities into one, like any loan, has its pros and cons. Before you decide on it, you should carefully analyze your home budget and see if it really is the right solution.
Advantages of consolidation
- Combines several obligations into one – so you do not have to remember about several repayments, only pay one installment once a month.
- In the perspective of paying one installment per month, the client pays less because the installment of the consolidation loan is lower than the sum of several installments of other loans.
- A consolidation loan can be a rescue against the debt spiral.
Cons Cons Cons
- The consolidation loan extends the loan period, i.e. the client will repay liabilities longer than originally expected.
- The amount that the customer has to pay back is growing – the installment is lower, but more is paid in total. A longer loan term means higher interest.
- A consolidation loan may involve additional fees, such as a commission, and the establishment of a mortgage security.
Summary of the most important information about the consolidation loan
We present a summary of the most important news about the consolidation loan that anyone who thinks about such a commitment should read.
- A consolidation loan is a combination of several liabilities from different lenders into one lender.
- There are two types of consolidation loan: cash consolidation loan
and mortgage consolidation loan.
- To have more creditworthiness when taking a consolidation loan, it is worth taking it with another person.
- A consolidation loan is one, lower installment instead of several large ones, however, it involves a longer loan period and a larger amount to be repaid.
- You can consolidate banking products, loans from loan companies and liabilities from personal cards.
- Often banks offer extra money when taking a consolidation loan – this is extra cash for other expenses.