How to consolidate loans?

Consolidation of loans

Consolidation of loans (refinancing) means paying off old debts, such as consumer loans, with a new loan. Refinancing is useful if the total cost of a new loan is less than the total cost of old loans. The purpose of combining loans is to avoid unnecessary expenses in several places by paying off the loan to only one lender. Combining loans gives savings on loan costs, you save on interest rates, on billing fees, it is easier to keep track of finances, you pay only one loan payment.

For example, if you have small consumer loans worth hundreds of euros, by taking out one larger loan, you can save hundreds of euros per month on expenses such as interest and account maintenance fees.

What loans can be combined?

These are usually unsecured consumer and quick loans taken out to buy cars, boats, repairs, household appliances or pay bills. For example, if you have accumulated credit card debt, and in addition to this you have taken out a loan for the purchase of household appliances, as well as made a down payment for furniture, and each account for these loans has different payment terms, you can apply for a refinancing that will cover the remaining amount of all these debts. Thus, you will not have to repay your debts at three different addresses, it will be easier and cheaper if only one loan remains to be repaid.

How do I combine loans?

Check all your existing loans and find out their total cost. Calculate how much the interest and other expenses on each loan are worth. After you determine the current situation with your debts, apply for refinancing from several creditors. You will receive individual loan offers based on your personal information and solvency. After that, compare the interest rates and monthly payments received from lenders with your current ones. Pay off the loan as soon as possible. When the loan repayment period is extended, interest expenses increase. Then the cost of the loan may be higher than you expected. Therefore, carefully plan a realistic repayment period in order to correctly estimate the cost of the loan. You should plan your own finances so that you definitely do not need a new loan during the refinancing repayment period.