Debt loan – when is it worth using?
September 18, 2019
A debt loan is a loan that we can use to pay off your debts. It is available in both banks and private loan companies
Debt loan – read before you take
A debt loan allows us to raise funds to pay back our liabilities. Taking it, however, you should analyze your financial situation, because it will be another debt that we will have to pay back. In addition, a debt loan is a costly option to get out of a financial one, which is because it is targeted at high-risk clients. Its advantage, however, is at least partially dealing with debts, “saving” on subsequent calls for payment, or shifting the spectrum of bailiff execution.
A debt-free loan is easiest to get in a non-bank company. To receive it, you should carefully read the conditions under which the lender will provide us with financial support. What should primarily interest us is the cost associated with it and whether the company’s offer includes loans for the indebted. The lender’s requirements usually do not differ significantly from those that we would have to meet at all when applying for a loan. Whether or not (even if we theoretically meet all the conditions) a debt loan will be granted depends on the internal policy of the non-bank institution.
The lender also has some obligations towards us – in accordance with current regulations, it must inform us of the total cost of the commitment, and provide all information about the loan in a clear, legible and uncertain way.
Who is the debt loan for?
Although the debt loan is primarily for people with financial problems, not everyone who is struggling with debts will receive it. Similarly to other products of this kind, the lender is here obliged to assess our creditworthiness and analyze whether we can afford to pay the debt. Before we take out a loan, we should also answer the question whether it will help us get rid of debts or contribute to the deepening of our problems.
As the name implies, it is worth applying for a debt loan when we have several different liabilities on our account and we do not have enough funds to pay them back. Although companies that grant debt loans will look at our credit standing and credit history, the fact that we have been late payers so far does not necessarily mean that we will not receive a loan.
Debt loan and consolidation loan
A debt loan is similar to another financial product, i.e. a consolidation loan. Although they are both intended to pay off their liabilities, it would be a mistake to put an equal sign between them. The most important difference between them is that the consolidation loan applies to those debts for which the repayment deadline has not yet expired. Therefore, if we are afraid that we will not be able to pay the next installment, it is good to contact the loan company in advance and look for a mutually beneficial solution. The consolidation loan (this also applies to the consolidation loan) allows us to combine several liabilities into one, which can reduce the monthly installment and more attractive repayment terms than many loans. In addition, managing one commitment (and remembering to pay one installment) is much easier than settling several debts at different times.
What else distinguishes a debt loan from a consolidation loan is whose account will receive the funds allocated under it. Although, as a rule, a debt loan should be used to pay its liabilities, the institutions that grant it do not monitor what the debtor will spend on the funds allocated to it. They are paid directly to his account, hence he can freely dispose of them. It is different with a consolidation loan – it goes straight to the bank account of the institution in which we have specific obligations. In addition, the consolidation loan (and more often a loan) is addressed to persons with creditworthiness. On the other hand, clients who reach for a debt loan usually cannot boast of sufficient creditworthiness or good history.
The last issue is the cost of both loans – the consolidation loan involves lower fees on the debt relief loan. The high cost of a debt loan is for the bank a kind of collateral and compensation for the fact that a potential customer may very well not take back the loan taken.
Debt loans are mainly offered by non-bank companies. Indebted persons will not be granted a loan or a bank loan. The exception to this rule is the consolidation loan, which allows you to combine many liabilities into one, but this applies only to those payments that are not yet overdue. Thanks to the debt loan, we will receive funds to pay off our most urgent obligations. However, we should remember that we will also have to give back the money from the debt loan, so we should only decide on it if we know that we will find funds for its repayment.