Unsecured debt consolidation loans -See our debt consolidation information
December 17, 2019
If you are getting to the point where your debts become unpayable (or you are already there) you can take the option to negotiate with your bank. “Wait … is that an option?” Sure! While one of the banks’ priorities is to recover their money, we must not forget that the last thing they want is to lose customers. This is partly because acquiring them in the first place also costs them money.
For whatever reason, the reality is that you have a good chance that your bank is willing to negotiate with you depending on your situation. Generally, there are two options to restructure the conditions of a debt:
See our debt consolidation information
If your bank did not agree to restructure or reduce your debt (or the conditions were not suitable) you have the option to refinance or consolidate your debts. In addition, the debt consolidation option via https://dedebt.com/ is preferable if you have more than one credit card debt. To consider this strategy it is important that you ask yourself two questions:
What are the advantages of consolidating my debts?
The advantages depend on the options you find to consolidate your debts but are usually the following:
- A longer-term with lower monthly payments
- Interest rates lower than your current debt
- Better management of your payments
- Maintain or recover your credit rating
What options do I have to consolidate my debts?
- Balance transfer card: In this option, you can consolidate the debts of several cards, even from different banks, into a single credit card.
- Loan or credit for debt consolidation: This option allows you to settle your current debts and owe to a single institution with friendlier terms.
- Mortgage loan: This option offers you much lower rates but you run the risk of devaluing the value of your home or even losing it completely.
I already managed to negotiate with my bank or consolidate my debts, now what?
Once you have found the perfect option for you, with better terms and interest conditions, you should focus on fulfilling and liquidating this new commitment.
Ideally, from the beginning, you have defined your personal budget but if you had not done so, do not worry, it is never too late to start. Define your budget and include “paying off my debts” as part of your financial goals.
Finally, be careful! Finding an option that allows you to get out of your debts is no reason to let your guard down and give in to the same habits that led us to debt. So stay within your goals and budget to avoid more financial stress.
Restructure the debt
In debt restructuring, you can negotiate aspects such as a fixed payment plan, extend the term to pay the debt and, on some occasions, deduct interest. It is possible that your bank accepts a restructuring not only because you have a good track record but because you show that you have the ability to pay. However, you should take into account that as the term increases, the debt may also increase even if the payments are lower.
Although this may seem like a dream option, debt reduction (also known as “take-off”) has its cons. You may reach an agreement with the bank in a way that gives you a discount on the total debt in order to make sure that you pay the rest, but the sacrifice will not only be on the part of the bank. When you settle a debt accepting a reduction, you damage your credit history and, with it, your possibilities to request another financing in the future.
Remember: Even when there is the possibility of negotiating with the bank, both options depend not only on the size of the debt but on your current payment capacity, history as a good or bad payer, the number of terms you have stopped paying, etc.
In case you receive an offer from the bank it is very important that you do not accept the deal without reading the conditions. Make sure you understand the total cost of what you will pay (including interest), what will be the extension of the term to pay and what are the possible penalties in case of default. If you notice that any of these points is not convenient for you, then it is better not to accept the deal.