Debt consolidation loan: what it is and how it works

Loan for debt consolidation

Examining in detail the pros and cons of debt consolidation, one cannot help but notice that this is a relatively complex operation from the point of view of the assessment of the feasibility and of the preliminary investigation process: it is necessary, in fact, to obtain all the documents relating to the loans you wish to pay off and obtain the extinguishing accounts, which attest to the amount still to be paid.

Having said that, the advantages that derive from it are manifold: it is clear, in fact, that having to pay a single installment per month instead of two or more is convenient and, in some ways, convenient, also by virtue of the fixed-rate used.

Debt consolidation is the tool available to all those who need to simplify the management of their loans by grouping them into a single loan: the market offers a wide variety of solutions, capable of satisfying the preferences and needs different.

The guarantees

In most cases, lenders who decide to grant financing for debt consolidation do not require the presence of collateral: therefore, there are no proprietary properties to be mortgaged or lien.

In any case, in specific circumstances the lenders could decide, in order to contain the risk of insolvency, to have the applicant sign an agreement in which the installments are expected to be exchanged; in other cases, only one promissory note comes into play which guarantees the entire sum paid or at least part of it.

In principle, however, the most widespread form of guarantee is represented by the signature of a third-party guarantor or of a co-obliged guarantor of the operation: it is particularly used if the applicant has a working length of time or if the loan involves a fairly significant amount, or if you are in the presence of someone who has had problems in the past repaying the loans taken out.

The contract

In a debt consolidation contract, the extent of the loan, the annual percentage rate of charge (in APR ), any guarantees required, the methods of financing, the reason for the charges not included in the calculation of the annual percentage rate of charge must be reported., the interest rate that is applied, the higher charges in case of late payment and, of course, the data of the lender, as well as those of the credit intermediary.

If one or more installments are not paid, the interest due is usually increased and late payment can be applied, depending on what is stipulated in the contract signed.