What is the reunification of debts

Basically, debt consolidation is a refinancing and is to group all loans (personal, mortgage, or cards) in a new mortgage loan to a longer period so as to reduce the monthly fee to pay. The reunification of debts appears as a solution for those who have multiple loans, by offering a monthly reduction of up to 50%, but the final debt increases due to the numerous charges and fees generated by the operation.

Requirements

For an approved bank debt consolidation a number of conditions must be met:

The client must have a home, with or without charges, to be used as collateral for the new mortgage. The total capital of the new mortgage can not exceed 80% of the appraised value of the floor (the financial institution will request an updated appraisal). The monthly fee for the new mortgage must not exceed 35% of net monthly income of the household.

Processing

To manage a debt consolidation have two options:

Through a debt consolidation entity, these companies make all the arrangements on behalf of the person concerned, negotiate with different financial institutions and propose the operation, which usually is to cancel all credit and hire a new wholesale mortgage capital and term which covers the outstanding principal amount plus fees and expenses that is debt consolidation. The broker will charge a commission for his mediation between 3% and 7% of the refinance. These companies, like those of fast loans, serve more customers in a hurry, in exchange for high fees. Directly with financial institutions: in very serious cases, the consumer himself can manage the reunification of debts by negotiating with your bank or other financial institutions, and can thus save the middleman commission.

Advantage

Here are the main advantages of debt consolidation:

After a debt consolidation to pay the monthly fee is lower. The debt consolidation allows you to access the best offers on the market, but not limited to a single bank. Reduces the effective interest rate. You can access the reunification of debts although listed by default. Speed. Confidentiality.

Drawbacks

The debt consolidation has several drawbacks:

Maturity increases, so will be paid for longer. Generates numerous expenses and fees (initial loan cancellation, formalization of the new mortgage broker commission) as debts increase. The debt consolidation agencies are not banks or financial, so are not subject to control of the Bank of Spain and lack a legal framework to regulate them. This motivates that often act with transparency and lack of abusive fees apply, resulting in their services confusing and even misleading to consumers. Promotes family indebtedness by providing a false sense of economic relief.

Source: Reunification of debts