Credit consolidation in practice
A grouping of credits corresponds to the fact of contracting a loan in order to repay others. It is therefore an installment loan just like the personal loan, the car loan or the work loan. The difference with the latter therefore lies in the allocation of the borrowed amount which will be used here to buy back other loans. Apart from the allocation and the rate which can vary from one type of credit to another, the rules applicable to installment loans prevail, namely:
- We borrow a specific amount,
- Which must be reimbursed over a period determined in advance,
- With a fixed rate and monthly payments.
When is it worth buying your credits
When you get a better rate
If the APR of loans made in the past is higher than that of the grouping of credits, it may be worth considering this solution. It would then be possible to reduce the total interest that remains to be paid and therefore to save money. However, this is unlikely since the interest rates applicable for consolidation are generally higher than those of other consumer loans.
When you have difficulty paying your monthly payments
Unfortunately, this is the most common reason for resorting to credit consolidation. It is indeed not uncommon when one has already had to borrow several times to be exceeded at one time or another by the monthly charge of repayments and to no longer be able to face it. The repurchase of its credits can in this case make it possible to find a solution which will make it possible to find a certain balance in phase with its capacity of repayment.
Reduce the amount of your monthly payments by grouping your loans
One of the objectives when consolidating several credits is to succeed in reducing the total monthly payments for which one is indebted. It is not the fact of collecting loans on its own that achieves this goal. The key is extending the term of the loan. The duration of a loan has a direct impact on the size of the monthly payments. For the same amount borrowed, the amount to be reimbursed monthly will be lower if the duration of the repayments is longer. The downside is that with an extended period, the total interest that will have had to be repaid in the future will be greater. However, the price to pay in this case is perhaps a lesser evil when one experiences difficulties.
Calculate the amount needed
To redeem credits, you must have at least a sum corresponding to the total amount remaining to be reimbursed. As an example, imagine the following situation:
You have 3 credits in progress,
- the remaining balance of your credit 1 = $ 6,000
- the remaining balance of your credit 2 = $ 3,000
- the remaining balance of your credit 3 = $ 2,000
- the total amount to be reimbursed = $ 6,000 + $ 3,000 + $ 2,000 = $ 11,000
In this example the amount to borrow would be $ 11,000. Please note that any closing costs must also be taken into account.
Beware of the closing costs of outstanding loans
During a redemption operation, do not forget to record the “closing costs” which will be charged to your account. Behind the word “redemption” hides the fact of making an early repayment, the conditions of which were specified in the initial credit contract. This process generally gives rise to compensation from you in favor of the lender. Legally, this compensation is capped at a maximum of 1% of the remaining balance due if the installments extend over more than 12 months and, if not, at most 0.5%.
Comparator of credit consolidation in Belgium
- Simulation in parallel with different organizations
- Quick identification of the best rate
- Free and non-binding online request
To simulate a grouping of credits, you must first calculate the amount required. It is entirely conceivable to request a sum greater than the latter in order to have additional liquidity. By adjusting the duration of the repayments, it is possible to reduce the monthly payment so that it is less than the sum of the monthly payments of the current loans.
How does a credit consolidation request go?
- We must start by carrying out a simulation by calculating beforehand the necessary amount,
- We will then make sure to choose an offer that offers the best rate,
- You submit your request online on the website of the chosen organization,
- The organization analyzes the request and assesses the profile of the requester,
- In case of acceptance, we receive an agreement in principle as well as the contract,
- The contract must be signed and returned to the lender,
- The money is then paid into the applicant’s account,
- The applicant can therefore settle / redeem his old loans.