Restructuring and consolidation are two options to face the payment of your debts in the event that you are having problems to cover the monthly payments. If you are looking for the best option, this information is for you.
Restructuring consists of reaching an agreement with the financial institution on how and how much a loan is being paid.
That is, negotiate new payment conditions, for example, you can agree to pay less monthly, although the term will be much longer and therefore the cost of credit will also be higher.
Another option is to choose to pay more each month, so the interest rate decreases, the same as the payment term and in the end, you will be paying much less money.
On the other hand, debt consolidation works when you have several credits, either with a different financial institution or within the same one.
In this case, all the debts are unified in a single account, so you would only be making one payment per month.
As you will see, these are two different financial instruments and it depends a lot on why you are having problems paying.
Debt consolidation is recommended if you constantly forget the cutoff or payment date of the different credits you have and prefer to have a single account.
It also helps reduce the amount you pay for interest or commissions on different credits.
While restructuring can help you pay a lower monthly payment, if you are having difficulty meeting all your expenses for the month.
About debt consolidation there are some aspects that you should not lose sight of:
If the accounts are in different institutions, check that each one accepts this type of program.
Keep in mind that the interest rate is lower or equal to the ones you are already paying, so that the monthly payment is lower.
The best thing is that once you have consolidated the debt, you cancel the credit cards that have already been paid off, to avoid continuing to pay annuities or use them again.
If your option is restructuring, there are also some aspects to consider:
The interest rate and the term indicate how much the loan costs you in the end, so it is important that you do not lose sight of them.
If you have a variable interest rate, a fixed rate may be a better option, especially for medium-term loans.
The change in the credit status must be recorded in a new contract, make sure that the whole process has been clear.
Finally, regardless of the option you choose, go immediately to the financial institution if you consider that you will be having problems paying , to reach a better agreement.
The best conditions for negotiation are generally offered to those who have not stopped paying or have not had delays. If you wait until it is impossible to pay, you may lose the best opportunities.