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Payday loan consolidation as ConsolidationNow notes is a modern solution that allows many borrowers to reorganize their existing payday loans so that they have greater flexibility in repayment. If this type of transaction offers the opportunity to obtain a new credit agreement with all new conditions, it should still understand its operation before using it.
Also referred to as “credit restructuring”, loan consolidation is a transaction that relies primarily on consolidating several loans into one: the main objective of this operation is to provide the borrower with a more attractive monthly payment.
With the credit consolidation operation, all loans such as auto loan, marriage loan or work loan are gathered to also meet their monthly payments in one global monthly payment. This practice is becoming more common, we meet many commercial offers on the consolidation of credit on the internet, local press and other means of communication…
It should be noted, however, that despite the increasing number of offers, a credit consolidation remains above all an operation that must be personalized according to the financial situation of the borrower and the nature of his outstanding credits. Otherwise, in addition to allowing the borrower to pool his loans, the loan consolidation is also an effective solution to reduce his monthly payments.
The decrease in the overall monthly payment is due to the simple increase in the repayment period. This extension is not inconsequential: a person who wants to consolidate its credits must understand that by reducing its monthly payment, it extends the duration of its loan and contributes, in this case, to increase the total cost of his new credit.
Identify the other aspect of loan consolidation
Admittedly, credit consolidation can provide relief to the borrower over a period of time. Indeed, with a single monthly payment instead of several in a single month, the borrower can quickly find a more stable budget following the reduction of its debt ratio. He can also build funds with the money he used to spend on his monthly payments.
However, despite this rather attractive aspect of credit consolidation, we must also be careful to analyze all the conditions of this transaction before deciding. Despite the fact that the loan consolidation can reduce its debt ratio, special attention must also be paid to the costs that such an operation may incur.
The credit consolidation can be advantageous, provided you only allow you to save more than you pay in the financial rate of the consolidation transaction. Yet, in most cases, pooling credit is often a costly operation for the borrower. If it allows to extend the duration of the loan and reduce the monthly payment, it remains in the end an expensive operation.
Just like with a simple personal loan, the interest rate of a credit union can increase as its repayment term increases. The final cost of the credit consolidation is thus high in the end. Most often, hidden fees are not specified during the interview, such as brokerage fees or administrative fees…
This does not mean, however, that the repurchase transaction is useless: in some cases, it may be necessary. To succeed in your credit consolidation operation, you only have to bother to simulate the loan and become aware of all the costs before committing.