Monthly Archives: April 2019

What is a Debt Trap?

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Debt trap?

What is a Debt trap?

Debt trap is a more familiar and used term for a debt spiral . This is a situation where an individual or even a whole family is unable to pay their creditors’ obligations. Which leads to penalties or other obligations by taking additional loans. The total amount and interest are thus increasing.

The most common reason for a debt trap is a poor assessment of future repayment options. As a result of the competitive struggle, lenders do not disclose all the details, which is considerably more expensive when using the product. Therefore, all the advantages and disadvantages should be carefully considered.

The most dangerous are loans up to 10 thousand and loans with maturities of less than 3 months. For these, we should be extremely careful and not be afraid to ask for help from someone who knows the issue. The fact that you own a personal identity card and you are not legal does not mean that you understand credit issues.

However, you can also get into a debt trap if you fail to pay a fine, charge, or improperly handle a credit or debit card. Jumping penalties and amounts charged are often so high that even a person with an average wage has no chance to pay them. Therefore, it is necessary to solve everything at the beginning by agreement before the claim is forwarded.

The third most common reason is job loss. When changing the income ratio, it is necessary to clarify whether the situation can be long-term and act quickly. There are options such as repayment schedule, or consolidation of multiple debts for one creditor, which then sets the repayment method. Often this option is the starting point.

If Debtor’s Debt Trap engulfs so much that it is unable to pay its obligations even at its best faith, personal bankruptcy is an option. However, this is often made possible by few people. The sooner the debtor decides to act the better for him.

If you are facing a problem with repayment, try to contact a debtor assistance institution as soon as possible. Some fall under non-profit organizations or directly under the state. You will not give anything for advice as opposed to another loan.

What is a Consolidation Mortgage Loan?

What is a consolidation mortgage loan?

What is a consolidation mortgage loan?

A consolidation loan may turn out to be a remedy for all those who pay off several loans and are not satisfied with the conditions under which it is carried out. It allows you to create an individual offer and reduce the installment. The real estate mortgage is the repayment security for the bank.

The basic assumption of a consolidation loan is to convert a few expensive loans into one cheaper one. The housing loan taken for several decades often becomes a liability that we are unable to repay regularly. Especially if we add the installment for electronic equipment, car or debt on the credit card. It’s easy to fall into the vicious circle of borrowing more loans.

One way to solve this situation is to convert several installments into one in another bank. Coming to the competition, we have a chance to get a reduced margin and fees. It is possible to consolidate the following liabilities under such a loan: housing loan, car loan, mortgage loan, cash loan, cash loan, liabilities under a credit card agreement, credit in a savings and settlement account.

The condition for obtaining a consolidation mortgage, however, is having creditworthiness, securing a loan for real estate, and a good history in the Credit Information Bureau. It is important not to have significant delays in paying back commitments so far. Recurring problems with the regularity of paying installments, as well as delay longer than thirty days may cause that we will not receive a consolidation loan. The history of five years is important for the bank.

Banks offer different payment options: they may have been equal or decreasing, depending on the client’s preferences. Some offers have so-called “Credit holidays” that you can take once a year. The condition is the timely repayment of installments for twelve months, in some cases, twenty-four months of regular payment is required to have a grace period. An additional convenience in many offers is the chance to borrow cash for any purpose under a consolidation mortgage loan.

Examples of periods for which such a loan can be spread are 30 years.

Examples of periods for which such a loan can be spread are 30 years.

Creditworthiness and the value of real estate determine the value of the consolidation loan. It can not be more than 80% of the value of the collateral. An appraiser’s assessment necessary to calculate this amount is the borrower’s cost.

Most often, a property whose mortgage is a loan security must be owned by the person applying for a loan, but there are cases in which it is allowed that it belongs to a third party who agrees to the loan.

In the case of mortgage loans, long-term repayment is secured by a real estate mortgage. This means that the bank will have pre-emptive rights to the property before other creditors when the borrower will not be able to repay the debt. Regardless of who the owner of the flat will be, the bank can claim his rights.

The purpose of a consolidation loan is to convert several loans that charge the borrower to one with a more convenient installment. This offer is addressed to people who simultaneously pay off various types of loans and are looking for a way to change their situation by securing a real estate mortgage. This is a beneficial way out of a situation that is meeting more and more people in times of economic crisis: we take more and more loans that we pay off for a long time including high interest rates.

A consolidation loan gives you the option of “credit holidays”, we do not have to worry about a few different installments each month, but only about one loan concluded on relatively favorable terms. The very need to consolidate loans is, however, an extreme situation which is prompted by exceptionally unfavorable circumstances, which it is better not to achieve. Definitely every decision to take a loan should be carefully thought out.