Bad Payer Debt Consolidation – What Alternatives?

Businessman cutting a credit card that canceled by financial institute due to negligent usage

Self-employed workers, employees and retirees can all apply for bad payer debt consolidation loans. With this in mind, large banks such as Likecredit, BeOne Bank, Sanjuan Finance, and companies with a more local connection, such as the various mutual banks, have therefore enriched their offer with this type of financing, which should have a fundamental objective to pursue: to make the burden of repayments linked to several ongoing loans is more “bearable”.

 

Personal or “purpose” loan?

Personal or "purpose" loan?

Simplifications of concepts, especially in the financial sphere, are useful but often misleading. For simplicity, finalized loans are defined as those that are granted for a specific good or service, while personal loans lack any form of justification. In the case of consolidation loans for bad payers, protested or financed with a good credit rating, we should speak of “purpose” loans instead. In fact it is a form of loans that is granted on a personal basis but to achieve the aim of improving the sustainability of one’s debt exposure.

This is a loan that can be obtained both when you have objective difficulties in repaying the loans that are already in place, and when you simply want to rearrange the various loans making them easier to manage as a whole (in terms of amount and number of installments).

Precisely for this reason, before becoming bad payers, you should act in a timely manner, given that banks can have very different “tolerance” thresholds. Some accept a number of payment “delays” equal to 3, while others can reach at least 6. Furthermore, when choosing the bank with which to take out the loan, one should look precisely at the credit relationship matured with it. Here we can have two extreme situations:

  • you have a loan in progress with a bank A that we are unable to repay. After the first delay when it is now clear that it will be difficult to keep up with the payment of the installments also in the future, it is useful to request debt consolidation with it before becoming chronic and aggravating the bad payer status;
  • you have an excellent relationship with bank B, with which you also have the current account through which the installments of loans already in progress are paid. It is appropriate to ask for debt consolidation with it even if the installments that it is difficult to pay are with other credit institutions.

 

Operation and choice

debt consolidation

In requesting a debt consolidation for bad payers, also in relation to one’s job position, a first investigation must be carried out aimed at knowing the tolerance thresholds of the various banks that offer this type of loan. Lenders who prefer a threshold higher than the accumulated delays are preferable (for example if you have 3 delays it is better to contact a bank that accepts 4 or 6 and avoid those that accept no more than 3 delays). Therefore, as with any other loan, various estimates should be requested, then a comparison should be made and the one that provides a lower outlay overall should be chosen.

Once you have found the best estimate, you must follow the procedure indicated by the chosen bank or financial institution: deliver the income documents, personal documents and the repayment accounts of all the loans you wish to consolidate. At this point all you have to do is wait for the outcome of the preliminary investigation phase and in case of a positive outcome, be punctual in repaying the only installment that will result.

What does it mean to consolidate?

debt consolidation

As mentioned at the beginning, the consolidation of loans or debts was created to make a loan more manageable. This is done by grouping the various installments into one monthly or periodic installment. In addition, it is possible to choose a ratio between rate and duration that allows to achieve a lower overall outlay. This means that if before we had 5 installments of 100 dollars each, now we would have to repay a single installment which is for example 400 or 450 dollars. For this reason, it is normally not recommended to request a debt consolidation by adding new liquidity.

 

When can I request it?

There are no limitations of “opportunity” if by requesting a consolidation loan an improvement is obtained compared to the previous situation. However, there are limitations dictated by the “time” that should not recommend a request for debt consolidation. For example, when loans that are coming to an end are included in the transaction (for which the repayment of the main portion remains), there is no convenience in refinancing a loan for which almost all the interest has already been repaid.

Furthermore, given that the reduction of the amounts passes both for the application of a normally lower interest rate and for an extension of the duration of the repayment period, a longer duration than necessary should not be chosen, unless this is dictated by the real need to have a decidedly lower installment than the sum of those already in progress. However, this is a decision that must be carefully considered.

 

The alternative of the transfer of the fifth

The alternative of the transfer of the fifth

Sometimes it can happen that the bad payer status is such as not to allow access to a normal debt consolidation. In these cases, with the exception of the self-employed, the transfer of a fifth of the salary can be requested. Thanks to the operation that characterizes it, it can in fact be used to pay off already existing loans, as well as to request new liquidity. However, each early repayment must be made by the applicant, having no relevance to the loans already present.

 

Examples of loans to consolidate debts

consolidate debts

Sanjuan Finance has already included Monorata in the loans section for some years. Also in this case the duration can reach up to 120 installments but the maximum amount obtainable rises to 75 thousand dollars. For those who want to protect themselves against the unexpected, the optional Loan Protection policy is provided.


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