- It is a financial product that serves to balance our financial situation.
- It is not a way to pay 50% less each month.
- It must be accompanied by a rationalization of our consumption patterns.
The reunification, grouping or refinancing of debts are different ways of denominating a financial product offered by a sector of the financial entities that serve to balance our financial situation. Basically, it consists of extending our current mortgage loan or setting up a new mortgage, with the amount of which we can cancel our personal loans, credit card balances available and other types of debts.
What is and is not a reunification of debts?
We will start with what it is not: a way to pay 50% less each month. It may surprise many who say that it is not what all the companies that have dedicated themselves to financial intermediation publicized: “Reunify all your debts into one and pay up to 50% less each month.”
This slogan is deceptive advertising, and so the legislator has considered it if it is not accompanied by additional information that clarifies that the reduction of the monthly payment is achieved by grouping all the debts in a new mortgage, which implies a higher outstanding debt and can than an extension of the term.
Payday loan consolidation consists of processing a loan that covers all unpaid loans- more info.
Reunifying our debts makes sense if, with the operation, we are going to balance our finances to be deleveraging in an orderly manner. For whatever reasons, we have over-indebted ourselves and reunified to pay the debts in an orderly manner.
But reunification must be accompanied by a rationalization of our consumption patterns. In short, adapt our standard of living to our income. Otherwise, a reunification of debt will not help, as soon we will have other debts and generate a snowball that grows and grows until nothing or nobody can stop our fall.
Expenses of a mortgage reunification
A piece of advice that will avoid many subsequent problems: you can directly process the reunification with a financial institution or do it with an independent financial intermediary, always demand the binding offer and the breakdown of expenses (which includes the provision of funds) a few days before the signature before a notary. Never sign anything without having these documents in your possession.
The main expenses to take into account in a debt refinancing are:
1. The appraisal of the home we are going to mortgage.
2. The cancellation expenses of the previous mortgage loan (the cancellation fee is paid plus the administrative and notary expenses) and the cancellation commissions of the personal loans and other debts.
3. The expenses of the constitution of the new mortgage that reunifies all the debts; they are the same expenses as in a normal mortgage, which must be taken into account that the opening commission often exceeds 1%.
4. Fees financial intermediary: if not hired directly and is handled by a professional, who should be required to abide scrupulously with Law 2/2009 (PDF). There is no legal limit, but above 5% I think they are unacceptable. You can and must negotiate this expense with the intermediary before delivering the documentation, and you must confirm them in writing.
With the bank or with an intermediary?
Some banking client advisory companies such as Ausbanc condemn the intermediary (misnamed the reunification company), but the truth is that even the law itself recognizes its usefulness:
“… can be useful to consumers who decide to contract these services by enabling a more efficient search of the loans and loans available in the market, while these entities allow consumers to gain bargaining power with the lenders, thus being able to access to better conditions in the loans they hire “.
In my view, a client can go directly to the bank without problems when he has time, financial knowledge and ability to negotiate with financial institutions this type of operations. In another case, you should evaluate the utility of leaving all procedures to an independent expert, always taking into account that you scrupulously comply with the aforementioned legislation and negotiate the fees whenever feasible.