Debt consolidation is a change in the current conditions of the loan agreement concluded with the bank. This procedure is carried out only by the bank that issued the loan to the citizen.
consolidation services are most often intended for citizens who currently have no financial ability to repay debt in the same way. That is, for citizens who have fallen into a difficult situation, which has resulted in the inability to make monthly payments in full.
The essence of loan consolidation
Standard loan debt consolidation looks like an increase in the loan repayment term. In fact, a new loan agreement is concluded with the borrower with the closure of the old one or changes are made to the current payment schedule. Each bank can carry out this procedure according to its own algorithms.
As a result of the increase in the repayment term, the monthly payment is reduced, the debt burden on the borrower is reduced. The new term is chosen in such a way that the payments are as a result feasible for the citizen. As a result, the client does not go into the category of problem and does not spoil its credit history .
As a result of the increase in the term, the total overpayment also increases in proportion, therefore, consolidation a loan cannot be called beneficial for the client . But in any case, if necessary, it is worth holding it so that the debt does not acquire penalties and fines, as well as for the benefit of its own credit history. In the future, when the financial situation of the debtor improves, there is always the possibility to make full or partial early repayment of the debt in order to reduce the overpayment.
How and when to consolidate loan debt?
For consolidation, you should contact the lending bank with your problem. In the bank office you will be directed to a specialist who deals with problem contracts. This may be a collection service or a bank security, each institution itself determines which department deals with the consolidation of credit debts. Usually this department is located in the central office of the bank or in the largest branch in the settlement. You can call the bank’s hotline and find out who and when you can contact.
Important is the question of when to contact the bank for debt consolidation . It is important to note here that this should be done in advance, before the very fact of the overdue monthly payment has come. In this case, there will be no fines and bad credit history; the current terms of the loan agreement will be changed without any damage to the borrower. So, if you understand that the moment is close when you will not be able to make the next monthly payment, do not delay the time, but immediately contact the lending bank with a request to consolidate the credit debt.
Many borrowers mistakenly believe that they may face a negative when contacting the bank with their problem. But this is not at all the case. Banks are also interested in having as few problem loan agreements with overdue payments as possible. This fact affects their reputation in the eyes of the Central Bank, and this is extremely important for lending organizations.
If you already have a current debt, it will be more difficult to make consolidation in such a situation. The contract has already moved to the row of problem ones, penalties and fines are coming over it. Not every bank will agree to meet the borrower’s needs and consolidate the existing problem debts. So, be prepared for the fact that you still have to pay all the fines and get up to the payment schedule, solving your financial problems. But in any case, contact the bank with your problem, it is possible that they will still help you.
Most often, banks themselves offer to make debt consolidation under a problem agreement, as the last step before filing a case with a court. But there is one caveat – a new loan agreement will be made out for an amount that includes all penalties and accrued interest for delay. As a result, the amount taken on credit can increase by several times on the papers, and interest will be charged on it again.
Be sure to think whether you need consolidation in this case, the credit history is still damaged, and the court will record the debt, but the court decision itself can cancel a significant part of the fines and interest.
Mortgage loan consolidation
During the crisis, the issue of consolidation mortgage debt has become particularly acute. The solvency of citizens has decreased, and the size of mortgage payments make up a significant part of the budget of the borrower and his family. Banks are willing to meet mortgage borrowers, knowing that the crisis affects the financial capabilities of citizens. If you have a problem with the payment of mortgage debt, be sure to contact the bank. Remember that the property purchased under the contract is a pledge, it is in your interest to negotiate with the bank in order to avoid withdrawal of the pledge.
In practice, most often the amount of payments is simply changed, some kind of addition to the existing loan agreement can be made. But the contract itself will not be reissued. The fact is that when drafting a new contract, you will need to re-collect certificates and make an assessment of housing. Therefore, this method will be easier.
Consumer loan consolidation
This operation is carried out by banks most often. In this case, almost all credit products can be attributed to consumer loans: credit cards, special purpose and non-targeted cash loans, car loans and overdrafts. Most often, citizens turn to banks with such problem products.
This procedure is nothing complicated, and the banks willingly agree to it. In a crisis, when problem contracts are becoming more and more, consolidation of consumer loans is the only opportunity for banks to avoid distressed loan agreements. Most of the deals are exactly consumer loans.
What documents will be needed to consolidate the loan?
Ideally, the borrower must prove to the bank that he really got into a difficult financial situation and cannot make monthly payments in full. This can be any documents confirming your position. For example:
– sick leave (yours or loved ones);
– employment record with a note of dismissal / reduction;
– death certificate of a loved one;
– Recipes for expensive drugs needed by the borrower or his relatives;
– documents about the loss or damage of real estate.
In general, these can be any documents that directly or indirectly indicate that it is impossible at the given moment to make payments on a loan. If you have such a document, the chances of endorsing debt consolidation are greatly increased. But even if the application is not supported by any documents, it can still be considered with a positive outcome.
When visiting a bank, you will need to write an application for debt consolidation. The form of the established sample will be provided to you by a bank employee dealing with this issue. Or you can pre-fill the benefits of a general type. It is better to prepare two copies of the application: you will transfer one to the bank, and on the other a bank employee will mark the application for review. If you refuse, you can go to court by attaching your copy of the application.