Almost every entrepreneur suffered from problems with financial liquidity. It is often the case then that you have to save yourself with high-interest loans, private loans, credit or debit cards.
Looping is easy then. Therefore, if you have financial problems, you need to do a cool calculation immediately. Is our business still profitable or should it be shut down and not go further?
However, if it turns out that this is only a temporary downturn, you should consider consolidating your debt.
What is a consolidation loan?
A consolidation loan is a long-term loan, intended for the repayment of various financial liabilities, secured by a mortgage on the property indicated by the borrower.
To put it simply – instead of several loans from different banks with different payment dates, only one installment is paid (in one bank). In addition, by taking a consolidation loan, you can reduce your debt costs and monthly charges arising from the loans taken, as well as incur the so-called liabilities. the free amount that can be used for current expenses or future investments.
However, before we get into the details of this type of debt, it should be emphasized that real estate is needed to secure the consolidation loan. It does not have to be our property.
However, if it belongs to a third party, the bank will require the consent of the owner for notary debiting of the mortgage. It should also be remembered that most banks require positive opinions about the timely servicing of their loans.
Consolidation is not for people who are already in serious financial trouble. Therefore, when we have significant delays in servicing the debt, one must take into account the bank’s refusal to grant a loan.
Who is the loan for?
A consolidation loan can be used when:
- several of our debts are expensive (high-interest credit cards, debit lines, cash loans) – thanks to using one loan we will save on a monthly installment because the interest rate on cash loans is even several times higher than a consolidation loan;
- we are losing financial liquidity and the debt loop is tightening – consolidation will then allow us to reduce our monthly liabilities;
- due to having a large number of liabilities, we lack financial resources – if the value of the property allows us, by consolidating our liabilities we can incur a new liability.
What will the company gain by taking a consolidation loan?
- will combine all existing installments, so you can pay one smaller installment;
- will be able to extend the loan period;
- will reduce the margin due to security in the form of a mortgage on the property;
- will increase creditworthiness.