Centralization of credits: pros and cons

Loans consolidation solution called centralization of credits caters exclusively to distressed debtors. It certainly allows to get out of a situation of over-indebtedness but in parallel, it has also some disadvantages.

The advantages related to the centralisation of credit

The advantages offered by the centralization of credits include the possibility of a reduction in monthly payments. A reality that immediately helps the overindebted borrower to better manage its door leaf. The consolidation of credit allows to release the person concerned of an uncomfortable situation of over-indebtedness. It can eventually blow a little and deal properly with its compulsory expenditure of the daily. Another benefit linked to a centralization of credits is also only have only one single loan and including a single monthly payment to settle. Contract more credits at the same time presents in fact, the risk of forgetting the payment of a monthly payment. This loan consolidation solution is undoubtedly a good alternative for distressed debtors, in big trouble of cash. It allows a flexible payment of instalments taking into account the concerned borrower repayment capacity. This formula offers the opportunity to directly support the repayment of borrowed capital, at the end of the month each debt is then paid.

Centralization of credit and its disadvantages

Certainly a centralization of credits is an immediate solution to manage quickly a case of overindebtedness but it also has its share of disadvantages. A proposal to reduce monthly payments is followed by an inevitable repayment duration extension while the rate of interest, subject to an increase. What induces the debtor with the obligation to ensure the payment of monthly payments over several years. Then, it is quite possible that he will have to make a cross on its future projects due to lack of budget to finance. When one includes loans through a centralization of credits, the debtor must pay both the principal and interest. If we opt for the payment of interests only, the monthly payments become heavy because journals on the rise. It remains to the borrower to choose the option that suits him the most. Another disadvantage of the use of the centralization is relative to the new mandatory fee upon subscription. Several creditors are present on the market, it is advisable to use a comparator or simulation of credits in order to benefit from the best rates.

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