Debt Consolidation: What Are Estimates For?

The financing sector modulates its offer according to demand. For this reason, in times of widespread over – indebtedness there is a strong push towards products such as mortgages or debt consolidation loans, as shown by the offers offered by online banks such as Fine Bank, financial companies such as Spin Lender and Capital Lender or banks of large groups such as Cream Bank. But what are we talking about?

It is a particular form of personal loan, since in essence it is aimed at replacing and reorganizing existing loans of any nature. In a debt consolidation estimate, both finalized and personalized loans can be included. Obviously it is good practice to proceed step by step, starting from the request for a quote. In this regard, there are differences, both on the level of “reliability” and validity of the estimate, and on the assessment of the convenience of replacing a loan for which several years have passed, leading to an advanced repayment of interest.

When are the quotes reliable?

When are the quotes reliable?

There are two options for requesting a debt consolidation quote. One has a more general character and is therefore purely indicative and does not have the characteristics of the actual estimate. It is mostly a first contact, which then needs the next step with an official quote request. Then there is the real estimate, which will be analyzed in detail and above all compared with the estimates obtained from other banks.

In both cases it is possible to perform an evaluation on the convenience with the use of special independent tools. On the web there is not a wide choice as happens for the evaluation of mortgages, but these are very useful tools, which should certainly be used before concluding one’s choice. But here you have to be careful, what you get is not a quote, because the latter must have very specific characteristics, namely:

  • the calculation date and possibly the validity date;
  • the signature of the person making the estimate (this aspect does not apply to online estimates which require saving in the customer area or sending a copy via e-mail which determines their unequivocal recognition, with the affixing of a unique recognition number);
  • the mandatory items which are: Tan and Taeg; amount of loans inclusive of extinction penalty which the consolidation goes to “consolidate”; total capital required (amounts to be consolidated and possible addition of new liquidity); total amount of interest that will be incurred until the end of the repayment; monthly installment amount; any redemption or installment collection costs; management, investigation, and extinction penalties; number of months of the amortization plan duration.

On the other hand, information that cannot be found on the estimate is that related to the calculation of the “savings” that is obtained if a debt consolidation is carried out. On the other hand, this type of notion is very useful, because a debt consolidation must first of all make it easier to repay the installments. This objective is achieved jointly with the lowering of the installment amount, which must be lower than the sum of the consolidated installments, and a reduced rate.

The goal of greater installment sustainability can also be achieved by extending the amortization plan, which in the case of consolidation, reaches up to 120 installments. This is a practice absolutely to be avoided because it is never convenient from an economic point of view, given that in the loan as in the mortgage, the amortization plan that is adopted is French.

Requirements required to request quotes

Requirements required to request quotes

The request for a generic estimate does not require any particular requirement: in the system only the “presumed” amount of the loans to be replaced will have to be entered, to see if it falls within the maximum amount that can be granted by the financial company or the bank of interest, and the duration in to whom the loan would be repaid.

To obtain a detailed personal estimate, on the other hand, you need the exact amounts of the loans to be repaid. This information can be obtained starting from the annual summary letter, from which the installments already paid will be canceled. Then you must enter your personal data, those of a document and the income situation. It is also essential to start from the fact that debt consolidation can only be requested by those who have made payments on a regular basis. So if you have become a bad payer, then the request for a debt consolidation estimate is a useless exercise because this type of financing is not granted in case of financial problems.

In this case the only real alternative is represented by the assignment of the fifth, which however encounters two further limitations:

  • it is aimed at self-employed workers, since the assignment is exclusively for employees (see also Transfer of the fifth private employee ), and for pensioners;
  • it relates to the type of dependency contract which one owns since it is rarely granted for long periods to those who have a fixed-term contract.

So how to evaluate its convenience?

So how to evaluate its convenience?

As already mentioned, a quote cannot enter into the merits of the aspect strictly linked to economic convenience. Furthermore, faced with various loans, the risk that there is an internal balance of conditions is very concrete. In fact, loans of still long duration, for which savings can be sustained, can have such a high level of convenience, to compensate for that much less present in the loans that are about to expire.

As a general principle, the fact that loans close to maturity should not be consolidated, because you would end up paying a very high total interest, after repaying almost all the original ones on the previous loan. As said, this type of assessment can also be done in a more objective way using specific tools that must have at least these characteristics:

  • have at least two spaces for the evaluation of the loans to be consolidated: the motivation is due precisely to the fact that what makes a consolidation different from a loan replacement is the merging of two or more loans in progress;
  • have the possibility to indicate the duration of the original loan and that of the residual amortization (for example if the loan was 48 installments and 15 installments have been paid there must be at least space to indicate that 33 installments are still missing);
  • rate and term of the consolidation loan which seems the best option.

In the answer, the calculation of savings must concern both the amount of the installment and the interest that will be paid less.

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