What does it mean to consolidate credits?

What does it mean to consolidate credits?

The sudden loss of income or the increase in interest rates can lead to situations of default in the payment of credit installments. An option capable of providing immediate savings is credit consolidation. How does it work?

11 Aug 20234 min

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What is a consolidated credit?

A consolidated credit is a financing option that allows you to combine various credits that you have in hand.

As a rule, banks consolidate credits when contracts are for housing loans, consumer loans and credit cards. For example, if you have a mortgage, a car loan and a credit card, you can consolidate all three.

If you consolidate credits only with consumer credits, the maximum repayment period proposed by banks is 7 years and interest rates are higher. But if you have a property to use as collateral, that is, a housing loan to consolidate with others, the term can be longer.

What is the goal of consolidating credits?

The goal of combining credits is to pay a single installment for several loans. The amount paid for all becomes lower, but the loan term is substantially extended.

If you are having difficulty paying your loans, debt consolidation can be the solution to not fail to make any payments.

What are the advantages and disadvantages of consolidated credit?

In terms of advantages, the risk of default on different credits decreases, as it makes it easier to switch to paying a single installment instead of several. The probability of missing a single payment is lower.

Despite the more attractive interest rates in the short term, by increasing the repayment period, you end up paying more interest on long-term loans. In other words, a consolidated loan allows for immediate monthly relief, but may not be as beneficial in the future.

As disadvantages of consolidated credit, you must still be aware that proceeding with this credit implies paying off debts first. This may incur costs with early repayment fees.

In the case of mortgage credit, this commission can go up to 0.5% of the amortized value if it has a variable interest rate, and up to 2% if it has a fixed interest rate. As for consumer loans, if the interest rate is variable, there are no penalties, but if it is fixed, it can go up to 0.5% of the amortized value, or up to 0.25% if it is the last year of the contract.

In addition, consolidating credits may also involve legal costs related to the new credit contract (fees and stamp duty).

Consider other options before consolidated credit.

Before moving forward with consolidated credit, consider less drastic options first. For example, if your goal is to lower the amount of credit installments, you can talk to your bank to renegotiate conditions.

In order to lower the installment of the credit, the bank may propose new conditions such as a discount on the spread in exchange for the subscription of other products. Let's imagine that you have a spread of 1.2% on your mortgage. The bank can propose to lower the rate to 1% if you sign up for a credit card. This, in practice, means that you will pay less for the financing monthly.

Another solution that can provide you with a lower credit installment is the transfer of financing to another bank. You can do this with any type of credit. But, as a rule, it is more common to do it with a mortgage loan. That is, if you are dissatisfied with the conditions of your credit at the bank where you have contracted it, even after renegotiating, you can request proposals from other entities according to your property and outstanding capital. The goal is to obtain more advantageous conditions that reduce the amount you pay for credit every month.

Does it seem confusing? You can always ask for help from a credit intermediary at Poupança no Minuto, who is available to assist you with any questions you may have. With a quick and assertive response, and through a free service, the mediator will guide and advise you throughout the process, no matter what option you choose to save with your credits.


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