With the legal reform, the combination of loans is beneficial as the new interest rate cap applies to both compound loans and ordinary consumer loans. There are more loans available that are better in terms of costs and terms than previous high-interest loans. However, it must be remembered that consolidation of loans is only useful when all existing loans are set off at once and no new loan is taken. In case if you have poor credit visit website to apply for loans then options are open now.
- In order to take full advantage of loan consolidation, you must first ensure that.
- You have a number of outstanding loans that are high enough in cost.
- Combined loans are usually large because they are intended to cover the outstanding balance of several loans at once.
- You do not need a new loan during the repayment of the compound loan.
The idea behind loan consolidation is to ease your debt by clearing all your past loans at once. A new loan that is raised on a compound loan is not the solution.
Once you have verified these two points, you will be able to go and find the best combination loan for you. We will now look at how to do this.
Make a list of your current loans
To begin with, you should list all your current loans from credit cards. Make sure that all outstanding loans and expenses are included in the listing.
Calculate how much compound loan you need
This item is linked to the previous section as the amount of the compound loan depends on the outstanding debt balances and total cost of your existing loans. The compound loan should set off all of your outstanding debt at once. Therefore, it is important that you thoroughly determine the total balance and total cost of your loans, including the margin, nominal interest rate, actual annual interest, possible account opening and maintenance fees, and other loan costs that increase the total cost.
For example, you will find the balance of an open credit card on your last invoice, and you will also find information on the total cost of the credit on the credit terms of the same invoice.
- Balance outstanding: € 800
- Payment term: 12 months
- Monthly payment: € 73.15
- Account Management Fees: € 3
- Interest: 9.50%
- Total annual cost: € 877.76
After calculating the total cost of all your loans, add up the total cost of the loans on an annual basis. This total will determine the amount of the compound loan you need. Your goal is to find a loan that has a lower total cost than the total cost of your current, stand-alone loans.
Compete for your compound loan
Combined loans should compete with all other loans and consumer loans. With the entry into force of the new interest rate cap, bidding for compound loans is your best chance of finding the most cost-effective solution to your debt situation. The new interest rate cap makes the comparison of loans clearer, as the interest rate on the loans may not exceed 20% and the total cost of the loan may not exceed EUR 150 per annum.