Debt reunification is a one-time payment of all our outstanding debts, such as a car loan or a credit card.
The way it is done is through the creation of a new mortgage loan in which this and the rest of our loans and other debts are grouped.
Reuniting debts may seem like a useful solution to loan problems, but before applying, it's important to know its most important characteristics. Debt reunification may not be for us.
Advantages and disadvantages
The first characteristic that we observe in a debt reunification is the reduction of our monthly payments. An advantage that is very appealing if we are going through a bad economic streak.
However, in the long term the results may change for the worse.
- It is true that by uniting all our debts in a single installment, the monthly expense that we have to carry out will be reduced . In many cases, this reduction can lead to less than half payment than before reunification.
- Reunifying involves a number of costs. Among them, the expenses that may arise from the cancellation of the previous mortgage and the rest of the loans, appraisal or the management of the procedure and even the opening of the new mortgage. The intervention of a financial intermediary also translates into more costs for professional fees.
- By unifying into one, the outstanding debt increases .
- The deadline may be extended. In this case, we will be paying our debts for a longer time, which will mean a greater expense in the long run.
A reunification should be a specific solution to the problems of loans and debts, but not become a common practice, since it carries a series of risks for those who ask for it, which are more complicated to foresee.
How to reunify?
If we are still convinced that reunification is a good solution for our case and we want to continue, we have two options: go directly to a financial institution or carry out the operation through an intermediary.
- Reunification through a bank is the cheapest, since you do not have to pay for the work of an intermediary. The procedure can be carried out from the cancellation of the previous mortgage and opening of a new one that joins all our debts, of its extension or of the concession of a second mortgage on it.
Each of these options has its pros and cons, either paying a single fee or avoiding expenses such as cancellation. The choice of one or the other will depend on the personal situation of each client.
- By reunifying through a financial intermediary, on the contrary, the costs will increase. But it can also be a good option if our bank at first did not agree to grant us a reunification, for example, the intermediary will be in charge of negotiating with the entity to obtain this concession for a new mortgage, based on the conditions that we have previously written down. It can also help us avoid cheating if we don't know much about the financial world.
In the case of thinking about a debt reunification as a long-term solution, it is very important to study, in addition to its advantages, the disadvantages that may arise so that we are not caught by surprise. In addition to these, know all the options that we have at our disposal to choose the most convenient.