You have probably already heard the term “debt consolidation”, often used as such in France and Canada and more commonly known as “credit consolidation” in Switzerland. What is it exactly? Debt consolidation, as its name suggests, involves getting a consolidation loan from a financial institution to pay off all its debts. Who is this option suitable for and what are the steps? A short overview.
What is a debt consolidation loan and how can help?
Debt consolidation allows you to repay multiple creditors in one payment, thanks to a single loan from a financial institution. One could say that the bank “redeems” your debts, here is why the term “redemption of credits” has become popular in Switzerland.
One payment per month
Since the bank is paying all your debts for you, it is to it that you will now make a single monthly refund in return. Having a single payment makes budget management easier and reduces the risk of delays! If you do not incur other debts, all your creditors can be paid quickly, which would allow you to maintain a good credit rating.
Interest rate reduction
Debt consolidation can be a particularly attractive option if you have unpaid commitments at high-interest rates (for example, credit cards, which often have a rate of 20%). By getting a new loan at a lower interest rate, you are rationalizing your debts in an intelligent way! Many types of debt can be bundled into a consolidation loan. If you have a doubt, simply ask your financial institution who will be able to tell you precisely which it accepts to repay or not (credit, credit cards, leasing, mortgage,…).
Who is this option suitable for?
What to do to benefit from debt consolidation and what are the eligibility criteria? Simply contact a bank or a credit bureau to obtain an analysis of your file without any cost or commitment on your part. If you do not correspond adequately to the criteria, they can advise you and reorient you towards a more suitable solution.
- Have an acceptable credit rating, so not too late in paying your debts.
- Have a steady income to be able to handle the consolidation loan.