The consolidation loan and its variation, i.e. the mortgage consolidation loan, is increasingly used for debt relief in Poland. It is not as widespread as a “classic” consolidation loan, so it’s worth familiarizing yourself with its definition and specifics. The consolidation loan itself is already quite well known among Poles. It is a tool that both banks and loan companies offer – and although the mechanism governed by a consolidation loan is the same, the terms and conditions for granting it can vary, and significantly. Banks rarely agree, for example, to consolidating liabilities from parabanks, such as very popular payday loans. On the other hand, non-bank institutions have no problem with this, and they are more liberal in their approach to creditworthiness and sources of income. Of course, something for something – in this case we will face a much higher interest rate, commission and possible additional fees. So today we will find out what a mortgage consolidation loan is, how it differs from “ordinary” consolidation, who can apply for it and what conditions must be met if we want to get it. We invite you to read!
What is the difference between a mortgage and cash consolidation loan?
Mortgage consolidation loan – who has heard of it, who took advantage of it? To start with, we must pay attention to a fact that not everyone remembers: consolidation loans are divided into two basic types. The first of these is the most common and best known, i.e. cash consolidation loan, which we usually receive for a shorter period, a smaller amount and within relatively small collateral. Sometimes, an ID card and income statement and verification at the Credit Information Bureau are enough (although the latter is not always required). The second, less popular type is a mortgage consolidation loan – it is granted for a longer period, with lower interest rates and for higher amounts, but with the necessity of securing in the form of a mortgage our property. Most importantly, however, the property in question can no longer be charged with another mortgage. Is a mortgage consolidation loan a good proposition for those who want to improve their financial standing? Doesn’t it mean even greater risk due to the need for real estate collateral? Is he able to help someone who has debt problems and wants to get out of them at all costs? Mortgage consolidation loan – let’s take a closer look at it.
What is loan consolidation?
What we have to say to ourselves at the beginning is that, in general, a mortgage consolidation loan has the same mechanism as a cash consolidation loan. The most important issue here is of course the form of securing such an obligation and the consequences it entails. So let’s start with the basics, i.e. remembering what credit consolidation is all about. In a nutshell, it is a combination and repayment of our existing liabilities by a new lender and a kind of “replacement” of the old loan with a new one – this time, however, with a lower, easier to pay installment. But in turn – let’s first remember what consolidation is all about (and consequently also the mortgage consolidation loan ). We can divide it into three steps:
- Adding up credit products that you want to consolidate – they may include both cash loans and installment loans, as well as credit card and debit card debt, account limits and, depending on the conditions set by the bank or loan company, also payday loans and loans parabankach. Here, the rules may differ depending on the institution that will provide us with financing. If the bank agrees to grant consolidation for payday loans from loan companies, it is usually subject to the consolidation of at least one product from a traditional bank.
- Your debt is repaid to a new lender – so you take out a new loan, but thanks to it you are finalizing those that have previously kept you awake at night. This is a kind of “blank card” that should help organize financial affairs. Therefore, the mortgage consolidation loan fulfills such a function.
- The resulting amount is divided by the number of installments during which you commit yourself to pay back the new debt. It is important that the amount of the individual installment is acceptable for you and possible to pay monthly without any problem. Remember that the longer the repayment period, the lower the installment. Another important information is the fact that banks and loan companies earn on interest and fees added to each installment, so extending the repayment period to the maximum also results in an increase in the total repayment amount. It is worth paying attention to it and possibly adjusting the number of installments – if of course we can afford it. However, if the mortgage consolidation loan is our only option, we must accept the costs of such a solution.
As you can see, the procedure governed by a mortgage consolidation loan is not particularly complicated and coincides with the mechanism of any other consolidation. Changes occur at the level of securing such financing.
Securing the consolidation loan with a mortgage
In the case of a cash consolidation loan, the main collateral for the loan is our income. Therefore, its amount will be relatively low and the repayment period will be relatively short. However, when we are interested in larger amounts spread over a longer period of time, the solution will be a mortgage consolidation loan. His collateral will be the mortgage of our property. Importantly, the property in question cannot have another mortgage or easement. We must also remember about much more complicated procedures for granting such financing. Of course, we must have a notarial deed of real estate, which is to be a collateral for the loan, in addition its professional valuation will be required. The valuation of such property is usually made by an appraiser appointed by the bank, while the cost of this valuation lies with the borrower. In addition, standard credit procedures, such as a certificate of income from the employer, calculation of creditworthiness and verification of us in databases such as Retro or Astro also apply here.
Mortgage consolidation loan – is it worth it?
So, as you can see, the mortgage consolidation loan has the same rules as traditional consolidation loans, but its specificity – i.e. significant amount of liability and extended repayment period – results in a more difficult, complicated and time-consuming procedure for granting it. However, if you have unencumbered property – a plot, a house, a flat, a business premises or a hall – a mortgage consolidation loan is undoubtedly an option to consider.