26 Mar Debt reunification: what is it and how can it help you?
Do you have many debts and no longer know how to pay them? Have you ever heard of debt reunification?
Uncontrolled purchases with the credit card can lead us to have a a lot of debts. When that happens, it is difficult to find alternatives or solutions to pay off those debts; they leave us with little money for our monthly expenses and put us in complicated situations.
But everything has a solution, and here we’ll talk about one of the best: the reunification of debts.
What is debt reunification? Debt reunification is the application for a mortgage loan to a mediating company to collect several debts in a single loan. And, in this way, we will only face a monthly payment, which will be considerably less, but at the cost of increasing the term and interest of the payment.
This mediating company will negotiate with the banks in order to establish the new payment conditions. It should be mentioned that this mediating company can even be a bank with whom we have the majority of our loans.
There are two types of debt reunification:
- With a mortgage: This type includes the mortgage in a single time. It allows you to extend the repayment period up to 30 or 35 years. As regards the total amount of the new mortgage, it may not exceed 80% of the value of the property.
- Without a mortgage: unifies all installments except for the mortgage. Your repayment term is between 10 and 20 years.
Approved and agreed upon the negotiation, the loans will be cancelled to reunify them in a single instalment. In this there will be a new interest rate and a new term. The latter is usually longer so that the monthly fees payable are lower.
Disadvantages of the debt reunification
Like any debt, they have disadvantages and costs to be taken into account.
- OPERATING COSTS: As mentioned above, the mediating company will negotiate with the banks for the cancellation and determination of new terms to settle the debt. But these cancellations entail certain expenses. In addition, mediator companies charge their commission for services. Therefore, you will also have to bear those expenses.
- AMORTIZATION TIME: The goal of debt reunification is to decrease the monetary amount of your loans so you can use your savings and investment income. Therefore, in the negotiations made by the mediating company, smaller monthly fees will be established. Consequently, the time for settlement will be longer.
- FINAL AMOUNT: By applying for a new loan and by increasing the repayment time, interest may increase considerably, in addition to increasing operating costs. So the final amount to be disbursed will be greater than originally considered.
The reunification of debts is an excellent way of escape when we have arrived at a critical debt situation, and where our income is consumed almost entirely for the fulfilment of debt obligations. That is, the liquidity we have is almost zero.
And, although it has several advantages such as paying less each month and having more cash, we must take into account that the terms, the final amount, the interest and the operating expenses are greater.
Therefore, our recommendation will always be that, before requesting the reunification of debts, an analysis is made and all possible resources are used for the fulfilment of payments. On the contrary, you can always go to this option.