When should you ask for a credit consolidation?
Over-indebtedness is still a ghost that haunts many Portuguese families. Before reaching this point, the client should consider a credit consolidation. In addition to allowing a personal finance solution, it allows you to reduce monthly installments by up to 60%.
If the consumer thinks about asking for a loan, he should consider some aspects. Firstly, it is not advisable to have an effort rate of more than 50%, considering that you have contracted a mortgage loan, so as not to have difficulties in paying the monthly installments of the financing in question.
Now, the more credits you have in your family budget (housing, car, training, among others), the higher the client’s effort rate. And often, families do not consider emergencies or unpleasant situations that may occur (such as unemployment among one of the couple’s members) and begin to struggle to pay off their various loans. It is at these moments that it makes sense to consolidate credits.
What is the consolidation of credits?
Credit consolidation can help households better manage their out-of-pocket expenses as they can save a lot by renegotiating credit. In Portugal there are two types of consolidated credit that can be used: with or without mortgage.
In the consolidated mortgage loan of the property, it is possible to join the mortgage loan or give the house as collateral for the loan repayment. In doing this type of credit consolidation, the client will have the possibility to increase the term of the financing for the same time available of housing credit (which, on average, lasts 30 years).
In addition, one can have the advantage of having interest rates similar to those practiced in the financing for the purchase of the property. This situation is only possible because the house is given as collateral.
In the case of consolidated credit without mortgage, one can also consolidate credits. This solution allows the client to repay their loans in a single installment, but with a longer term. If the consumer chooses to restructure loans in this way, he may have a lower interest rate, which allows for greater savings and less effort in the payment of monthly installments.
Whichever option you choose, the truth is that in consolidating loans you can join all the loans into one, paying only a smaller monthly fee due to the increase in the duration of the term. Having a lower installment to pay every month, the household will have a better chance of recovering from their financial situation.
How can consolidated credit help families?
For families in over-indebtedness, the consolidation of credits can be a tool that allows to reduce monthly loan installments. Reducing this expenditure allows the household to increase its level of savings and, in this way, rebalance the monthly budget and manage its debts in the best way. Thus, the consolidation of credits allows for greater financial flexibility.
Families who hold multiple loans at various financial institutions know how complicated it can be to follow up on loan repayments because they are often several days of the month, they have different values and different interest rates.
By consolidating credit, the provision is only one, on a single day of the month, with only an interest rate and a payment term, making the whole process of managing personal finances much easier and simpler.
Although this type of credit can be granted to any person, it is more intended for individuals who hold several loans (something that is not difficult to find on the days that occur).
The provision of housing loans, loans to purchase a family car, or specialized financing to furnish or make works at home are common expenses for several Portuguese families. The consolidation of credits allows to have a greater financial slack for those who have banking problems.
What are the requirements to obtain?
There are two situations in which the Portuguese opt for a credit consolidation. On the one hand, who is at risk of over-indebtedness due to unemployment, divorce, illness or other similar situation. On the other, who wants to save more on the value they pay for their loan charges.
So, if the consumer thinks about performing a credit consolidation, with only one remaining, there are necessary requirements that it is essential to know.
In the first place, it is not possible to hold any late payments, since the probability of a consolidated loan being denied by the financial institution is very high. To do this, the client must negotiate with his bank through PERSI, in order to settle his debts first. As such, it is also not possible to consolidate credits if the customer’s name is on the Banco de Portugal’s blacklist.
Another requirement is the maximum age, which in Portugal is 75 years. Lastly, and like other loans, the consolidation of credits requires a guarantor. The guarantors are a guarantee to the banks that the amount owed will be paid.
Consolidate credits: is it a good idea or not?
The advantages of credit consolidation are obvious. On the one hand, the household gets the loans all together, holding only a monthly installment. On the other hand, this payment is reduced, since the payment term increases and the interest rates may be lower. Finally, the consolidation of credits also allows savings in commissions (once you have only one banking institution and not several) and ultimately reorganize personal finances.
But it is also necessary to consider the less positive aspects of credit consolidation so that the customer can make the right decision. Since the repayment period will increase, the consumer will pay more interest. At the end of the term, the cost of financing may be higher than expected. On the other hand, it is possible that the customer may be penalized for early repayment, so you should be aware of any costs before you do so.
Finally, one should not think of the consolidation of credits as a way to obtain more financing. This is a thought that will lead anyone to get more indebted due to the accumulation of loans. It is crucial to always make a balance between income and the possibility of payment.