Credit solutions are excellent forms of financing for our most urgent needs or for carrying out projects that we keep in a drawer.
The problem arises, however, when credits accumulate and begin to put pressure on our personal finances, leading to difficulties in continuing to fulfil our contractual obligations.
When we find ourselves involved in a situation where it becomes unfeasible to pay the monthly credit instalments, it is urgent to find a solution which, not infrequently, comes in the form of consolidated credit.
What is a Consolidated Credit and how does it work?
Consolidated credit is a financial solution that, in practice, aims to combine all the credits we have into one with more competitive contractual conditions.
When we take out a consolidated loan, the credit institution (which may be different from those with which we took out previous credits) will settle all loans and remain our sole creditor.
In contractual terms, when consolidating credits, we will have only one monthly instalment (smaller than the average of the previous ones), a longer repayment period, lower interest rates and even extra financing.
In total, we can save up to R$500 in instalments every month and reduce the percentage of our budget that is allocated to paying financial charges.
Benefits of Credit Consolidation
As we have already noticed, credit consolidation will allow us to save hundreds of euros each month in instalments, but the advantages of this financial solution do not stop there:
- Reduction in the Effort Rate: by cutting up to 500 euros in monthly instalments, our effort rate (Monthly charges for credit instalments / Monthly household income x 100) will be significantly reduced, which ends up resulting in better financial health;
- Lower interest rates: as a rule, the interest rates associated with consolidated credit (TAN and APR) are lower than the average for other consumer credits, which results in lower instalments;
- Extra Financing: in addition to the amount necessary to pay off our credit debts, consolidated credit allows us to request extra financing to use as we wish;
- Better financial management: in addition to reducing the value of instalments, the consolidation of credits will allow us to have only one monthly instalment to be paid to a single credit institution and over a longer period;
- Simple and quick approval: by using the online contracting channels provided by credit institutions, we will be able to contract a consolidated credit in just a few days.
How to calculate monthly savings with Credit Consolidation?
To calculate the savings we can achieve with credit consolidation, the first thing to do is calculate our effort rate.
Let’s imagine that, for this purpose, our household’s monthly income is 2000 euros and we are paying credit instalments worth a total of 850 euros resulting from a car loan worth 12 thousand euros and a works credit worth 10 thousand euros.
With these values, our effort rate will be:
Our effort rate: 850/2000 x 100 = 42.5%
Now that we know our effort rate, it’s time to compare the different consolidated credit solutions that exist in the Brazilian financial market, using the simulators that credit institutions make available to us.
After several searches, we decided to access the UNIBANCO consolidated credit page, a solution that allows us to request between 5 thousand and 75 thousand euros of financing with repayment terms ranging from 24 to 84 months and still have access to extra financing up to 70 thousand euros.
Using your consolidated credit simulator, we decided to request the 22 thousand euros corresponding to our total credit debt with a term of 84 months.
The result of the simulation will be R$414.66*.
As we can see, with UNIBANCO consolidated credit we can save more than R$400 in monthly instalments, an amount that will have a positive impact on our effort rate, otherwise let’s see:
Effort Rate after Credit Consolidation at UNIBANCO:
414.66/2000 x 100 = 20.7%
In other words, we cut the monthly financial costs we had until then by more than half.
*The simulation presented concerns a financing of €22,000 to be paid in 84 monthly instalments of €414.66. TAN 13.650% and APR 15.8%. MTIC €35,219.50.
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