Debt consolidation: all you need to know
Are the installments to be paid for mortgages or loans too many, and too heavy for the family budget? Debt consolidation can be used. What is it about?
Debt consolidation: what is it?
Debt consolidation, an instrument introduced by Italian law with Legislative Decree 212/2011 to avoid household over-indebtedness in a period of crisis like the current one, is nothing more than a loan that allows you to meet a certain number of installments related to different loans, merged together into a single installment of a lower monthly amount, a higher amortization period and a similar, if not lower, interest rate, which makes the extinction of debt more sustainable and better manageable, weighing less on the family portfolio.
The previous loans are extinguished by the bank or the financial company that accepts your request for consolidation, becoming the sole creditor of the loan.
How to get it
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 evidently the basis for determining the amount of the loan to be granted for consolidation.
Who can request it
The loan for debt consolidation can be requested by natural and legal persons already in possession of home loans and loans, and, in theory, 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.
The contract: what it must contain
In the consolidation loan agreement, according to the law, it is necessary to indicate the details and contacts of the financing institution, the amount of the loan, the number, deadlines and amounts of the installments, payment methods, interest rates, prices and conditions applied (including the rate of default), the APR and the way in which it is calculated, the guarantees required and any additional insurance coverage.
When choosing a loan, always consider the APR, because it summarizes all the conditions applied.