It facilitates the payment of multiple loans, although it entails a significant cost and is recommended in very specific cases
does payday loan consolidation work? The consolidation of payday loans consists of grouping all the payday loans that we have contracted in a single loan. In this way, we will only face the payment of a single monthly fee whose amount will be less than the sum of the different quotas that we previously had to face. That is, debts are collected to reduce considerably what we pay per month, at the expense of increasing the repayment term and, therefore, the final cost of the operation due to interest.
This way of dealing with the payment of our debts can be managed by specialized companies, called mediators, which allow us to unify loans and mortgages that we have with different banks or with different interest rates. Debts can also be reunified through a bank with which we have the majority of outstanding loans or mortgages. Let’s take a look now at the reunification process, its expenses, advantages, inconveniences, and requirements.
How to go from paying several monthly installments to one
The path towards the reunification of our debts is not particularly complicated, although it does require the study of our case by the mediating company. This will analyze our debts, the interest we are paying and the repayment terms that we have before us, once the transaction is approved, start negotiating with the different banking entities the new payment terms.
When the process is underway, all our loans and mortgages will be canceled to reunify them into a single mortgage with the new conditions previously negotiated. This new mortgage will add the total of our outstanding debts and will have both a new interest rate and a new amortization period, usually longer to reduce the monthly payment that we will have to pay.
What expenses are involved in the reunification of debts
Bringing our debts together into one implies a series of expenses that should be taken into account, beyond the interest cost mentioned above.
- As the reunification implies the early cancellation of all our loans, the most usual will be that we have to pay the usual cancellation or prepayment fees.
- On the other hand, to unite our debts we must formalize the opening of a new mortgage, with all the associated expenses that this entails, such as the commission for opening a mortgage, the costs of appraising the house or mortgaged property, the Tax of Legal Acts Documented or notary fees.
- Finally, if it is decided to manage the reunification through a mediating agency, it will charge its own rates; On the other hand, in case of reunifying the debts through our own bank, these usually do not charge commissions for the reunification operation.
What requirements are asked to reunify debts
There are several conditions for us to access the reunification of our debts. The first is that we can not choose to unify some debts and not others: we must group each and every one of the loans that we have under the same mortgage.
Thus, the second most common requirement is that the amount of this new mortgage does not exceed 80% of the value of the mortgaged property. This offers an additional guarantee to the entity with which we have debts, although the normal thing is that they also ask us for the usual requirements that apply to the granting of any mortgage: stable and demonstrable monthly income, not being included in a list of defaulters and present a guarantor to support us.
Although reunifying debts will very significantly relieve the monthly cost of our loans, it will also increase it in the long run. Therefore, it is convenient to analyze very carefully all the costs that we will have to face during the reunification process as well as the final expense that will result from having extended the payment of our loans.