How Does Credit Consolidation Work?
Credit consolidation involves combining your various loans, in a broad sense (credit card, personal loan, overdraft, credit line, etc.) into a single debt with just one financial institution. Here’s how credit consolidation works:
Simulate your credit consolidation
Originally, each of these loans had different interest rates. However, with credit consolidation, a single rate is applied to all your loans. The main goal is to improve the visibility of your total debt, allowing for better management of your overall budget. This helps you avoid unnecessary new debts due to poor budgeting.
Credit consolidation also offers the opportunity to reduce your monthly payments by optimizing the overall interest rate. Additionally, your broker Credafin, the bank, or the credit institution aims to lower your overall debt ratio (with 30% being the critical threshold) to align it with your budget, avoiding constant financial strain. The debt duration may be extended accordingly.
Finally, note that almost all types of loans can be consolidated, such as consumer loans, revolving loans, and even credit card loans.
Find Frequently Asked Questions Below:
- What is credit consolidation?
- How does credit consolidation work?
- What happens during credit consolidation?
- What is the interest rate for credit consolidation?
- How many times can you consolidate your loans?
- When should you consolidate your credit?
- What is the purpose of an assigned loan?
- What is the purpose of revolving credit?
- Why consolidate your credit?
- Why choose credit consolidation?
- How to consolidate your loans?
- Which bank to choose for credit consolidation?
