Payday loan consolidation is a financing solution that allows all previous debts to be extinguished and consolidated into a new loan with a single monthly installment to be paid. In practice, multiple debts of a smaller amount, with short-term maturities and medium-high interest rates, are combined into a single debt with a long-term maturity, in order to make the debtor pay a monthly payment of less than the sum of the previous loan installments, for a longer period of time.
The payday loan consolidation loan facilitates all those who have two or more loans in progress, unifying them all in a single loan. With payday loan consolidation it is also possible to request additional liquidity.
Who can apply for payday loan consolidation?
The loan for payday loan consolidation can be requested by natural and legal persons who already hold home loans and loans and, theoretically, by people who are in any income condition as long as they are sustainable or guaranteed: public or private employees, pensioners, artisans, self-employed and even unemployed.
How is payday loan consolidation achieved?
In order for the consolidation loan to be granted, certain factors must be taken into account: the applicant must not represent a risk for the institution (according, of course, to the criteria of the institution itself); the relationship between his monthly income and the installment must be sustainable ; the applicant must not be reported as a bad payer. In case the applicant does not have an income or a regular pension, after having examined the applicant’s financial situation, the lender of the loan will ask as a further protection against the possible insolvency the presence of a guarantor. It may also happen that the bank asks the client to sign a bill for the amount of all or part of the loan, as a further guarantee. On the other hand, banks are not required to pledge liens or mortgages on properties to guard against insolvency, unless it is specifically a loan for consolidation.
To be able to provide the loan, the bank needs all the documents related to the loans to be extinguished. Particularly important are the extinguished counts, or the calculations of the residual debt that must be repaid to the original creditors. These counts are the basis for determining the amount of the loan to be granted for consolidation.
What are the advantages of payday loan consolidation?
Requesting payday loan consolidation allows you to have fewer thoughts every month! Here are some advantages:
- pay off all the loans in advance,
- can be requested by pensioners and by all public, state and private employees,
- have additional liquidity without having to justify the request,
- possibility of access also to bad payers,
- sole financial contact,
- have only one monthly installment to pay,
- choice of loan duration and installment amount,
- it is possible to request an insurance policy to protect the repayment of the loan in the event of unexpected events,
- installments and fixed rates.
Generally, the granting of a loan for payday loan consolidation is not subject to the presentation of real guarantees (or pledge or mortgage rights on assets owned by the applicant). However, in some cases, in order to limit the risk of insolvency, the financial institutions submit to the applicant a contract that provides for the repayment of installments, or a single bill, able to guarantee a part or the entire amount disbursed.
However, the most widespread form of guarantee is the signature of a co-obligor or a third guarantor, who acts as guarantor of the success of the transaction. This is a rather common request, in the presence of special conditions (such as an applicant with a recent length of service or with a particularly large amount of the consolidation loan or some small payment problem with the loans it intends to consolidate). In any case, it is not possible to establish rules that are valid a priori since the possible request for guarantees is at the discretion of the individual Institute which decides on a case-by-case basis, depending on the risk profile of the transaction and the individual applicant.
Failure to pay an installment
The interruption of the repayment of the loan entails the immediate non-fulfillment of the financing institution and the risk of unpleasant consequences:
- the interest due would be increased, with the application of a default;
- there is a risk that your name will be included in the list of latecomers and / or reported to credit protection bodies (the Central Risks), which will share information with the entire banking and financial system. The result will be a worsening of the customer’s creditworthiness and a consequent greater difficulty in obtaining credit in the future.
Failure to timely pay even a single installment authorizes the lending institution to unilaterally terminate the contract. The customer will be required to pay all bank and protest charges as well as all the costs incurred by the Institute to recover the sums due, in addition to a possible penalty.
Early repayment of the loan
The law establishes that it is always possible to extinguish the loan early with respect to the agreed term. The customer who chooses to exercise this option will be required to repay the outstanding outstanding capital, plus a penalty which, by law, cannot exceed 1% of the amount financed. If the contract does not specify the amount of residual capital after each repayment installment, the sum of the present value of all installments not yet due on the date of early repayment shall be understood as residual capital.
payday loan consolidation: is it worth it?
A payday loan consolidation loan has some undoubted advantages: first of all, it allows you to plan your future more easily, as it is certainly easier to manage a single monthly payment compared to many different loans. As mentioned, moreover, the new installment will be a little lower than the sum of the previous ones, which certainly does not hurt.
On the other hand, however, we must not underestimate the costs deriving from the extension of the repayment period, consisting of the highest interest on the amount obtained. It is therefore important to consider whether with a payday loan consolidation you will not end up spending much more than when you had more separate funding.