Debt consolidation: what is it?
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? Read what is a debt consolidation in this article.
Debt consolidation, an instrument introduced by Italian law with Legislative Decree 212/2011 to avoid the over-indebtedness of families in a period of crisis such as the current one, is nothing more than a loan that allows you to face a certain number of installments also related to different loans, grouped together in 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 the debt more sustainable and better manageable, weighing less on the family portfolio.
The previous loans are paid off by the bank or the finance company that accepts your consolidation request, becoming the only creditor of the loan.
Who can request it?
The loan for debt consolidation can be requested by natural and legal persons who already have home loans and loans, and, theoretically, by people who are in any income condition as long as sustainable or guaranteed: public or private employees, pensioners, artisans, self-employed and even unemployed.
How to get it?
In order for the consolidation loan to be granted, some 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 your monthly income and the installment must be sustainable; the applicant must not have reports of bad payer against him.
If the applicant does not have a regular income or pension, the bank providing the loan, after examining the applicant’s financial situation, will request the presence of a guarantor as further protection against possible insolvency. However, banks are not expected to apply for pledges or mortgages on properties to protect themselves from insolvency, unless it is specifically a consolidation loan.
In order to disburse the loan, the bank needs all the documents related to the loans to be paid off. Extinct accounts are particularly important, that is, the calculations of the residual debt that must be repaid to the original creditors. These calculations are evidently the basis for determining the amount of the loan to be granted for consolidation.
The contract: what must it contain?
In the loan agreement for consolidation, according to the law, it is necessary to indicate the data and contacts of the lender, the amount of the loan, the number, deadlines and amounts of the installments, the method of disbursement, interest rates, prices and conditions applied (including the rate of default), the APR and the way it is calculated, guarantees required and any additional insurance coverage.