Sometimes criticized, the grouping of credits can be scary. However, in some cases, it has financial and administrative advantages. We present these advantages to you, as well as the points to be careful about before choosing this solution
What is credit consolidation?
Some people sometimes have to repay several credits at the same time: a loan to finance a car, personal projects, a credit card with a reserve of money, a credit card taken out in supermarkets …
Credit consolidation is an installment loan which consists of consolidating your loans (excluding mortgage credit) into a single credit. The duration, the rate and the monthly payment are fixed and determined from the opening of the contract.
Who is concerned?
Anyone who has used consumer loans (personal loans, home improvement loans, car loans, store credit cards or credit reserves linked to a payment card) can make a request for credit consolidation.
Why make a credit grouping?
The main reason for pooling loans is to decrease your debt ratio:
- by adjusting and extending the total duration of the credit, one single monthly payment is paid which is smaller than the sum of all the monthly payments currently due each month. There is however a maximum duration depending on the amount, the financial body can inform you about this.
- in some cases, by obtaining a more advantageous interest rate.
At the same time, the grouping of credits allows administrative simplification. There is only one payment per month and only one direct debit date, one contact company, and we know the one and only date on which the reimbursement will be finished. Less risk of errors therefore.
What should you watch out for?
If the repayment of outstanding credits is almost finished, it is generally not advantageous to carry out a consolidation.
Likewise, if you combine credits that originally had fairly low interest rates, it is possible that the consolidation rate will be higher and that it will ultimately cost more.
It is therefore important to fully integrate all the parameters and do your calculations with your financial institution before making a decision.
How to proceed?
Generally, the organization that offers to group all the credits takes care of everything. We often benefit from an expert who is entirely dedicated to us. He will therefore know our file directly with each contact: this can be very practical. This person will take care of the administrative procedures and regulate the formalities for termination and reimbursement. Which can also make our lives easier.