Consumer credit, debt consolidation
Help – Over-indebtedness – Debt problems
The consumer credit tool is a double-edged sword: if on the one hand it allows families to access credit in a fairly simple and fast way, on the other, in an equally simple and fast way, it can put the consumer in serious difficulty . The main problem, according to consumer associations, which increasingly took the field to tackle the problem of over-indebtedness, is the absence of a financial culture that provides, with simple and direct language, the necessary tools to be able to make choices aware.
Even if in Italy the problem of over-indebtedness is not as serious as that present in Great Britain or in the United States, more and more often we see families literally drowned in debts. This was a consequence linked to the boom in credit access, which exposed families to a level of debt, no longer sustainable once the global economic crisis broke out, which eroded spending capacity.
Unfortunately, especially today, it is not uncommon for a family in debt with 10 different financial institutions to use almost all of its income to pay 10 different installments, some of which are often ridiculous, such as eg. an installment of 30 USD for the installment purchase of a mobile phone!
But even if all the installments were less than 50 USD each, at the end of the month at least 500 USD would have to be shelled out just to avoid the risk of ending up in the bad payers black list, due to missed payments or delays.
It may therefore happen that in this family, having to face other expenses, it is impossible to honor all the debts and that there is therefore the need to resort to another loan that extinguishes all the loans and reduces the installment to just one, perhaps of lower amount, extending the duration … Debt consolidation is a financial instrument now widely distributed and advertised by all financial and banking companies. For example Intesa Sanpaolo offers the Monorata loan, Unicredit has in its line CreditExpress Compact and we find known examples in the major credit institutions such as Bnl, Credem, etc.
Given the emergency in which many families have been found, there have been some regulatory interventions, which have also included debt restructuring procedures that have also extended to private individuals.
The only way to avoid over-indebtedness is to never exceed the threshold of 30% of net family income, considered by all experts as the point of no return for the family economy.
Revolving credit card, conscious use
Another widespread and considered risky tool for over-indebtedness is the revolving credit card.
In reality it can be equated with a real loan, since it provides for payment by installments with interest on the amount spent.
The main risk derives from two factors:
- unawareness of people: you think you have cash in your pocket and do not consider the continuous payment of interest on each purchase.
- The mechanism of the revolving credit card: each installment paid reconstitutes a part of the credit available on the card. The “loaded” credit can be spent at any time, paying interest in a continuous cycle.
However, demonizing the use of revolving cards is wrong. It is not the instrument that is not valid, but it is the use that is not aware that some make it “risky”. Obviously, great care must be taken to choose a revolving card that does not present excessive interest charges and management costs that are too high.
On the other hand having a tool that allows you to get a small loan quickly, almost immediately, is very important and useful. Abuse it though (a speech that also applies to the use of a credit card with a balance, perhaps with a large credit limit, or for small or small loans) is always very risky.
The Benefits of Debt Consolidation Loan
The objective of debt consolidation is to obtain a repayment installment that is easier to manage (by combining the various installments into one, for an amount lower than that obtained with the sum of all those already existing). This can be achieved with a specific loan which is precisely that of “consolidation of loans or debts”, or with the assignment of one fifth of the salary or pension.
In the first case it is the type of financing that going to repay existing loans, to replace them, allows the achievement of a single monthly installment to be paid (a single deadline is easier to administer and remember).
In the fifth sale, on the other hand, the sum obtained, in whole or in part, can be used to repay other existing loans, but without this specific purpose. It is in fact a personal loan and therefore not aimed at a predetermined use.
How it works: requirements and procedure
We must logically make a distinction between debt consolidation and salary-backed loans. In the case of consolidation, the first step is to go to a bank or finance company that provides this type of loan, with a grant that is sufficient to repay existing loans (often up to 75 thousand USD).
In addition to the income documentation (pay slip for employees, pension slip or cud for pensioners and Unico for the self-employed) and personal documentation (valid identity document and health card or tax code), the counting of early repayment of the loans to be absorbed.
The bank provides to recount the sum necessary to pay off all the loans, and to assess whether it can grant the necessary sum. If he decides to grant the loan, he will repay the various loans in progress with the other banks and financial institutions, without paying the sum directly to the applicant, who will have to start paying the new installment according to the deadlines and the amounts stipulated in the contract.
If instead the fifth assignment is used, with the same purpose, the extinction counts are not needed, and the bank will pay the sum granted to the financed. It will therefore be this that must personally extinguish any active financing.
Who to contact?
In case of difficulty it may be useful to contact the consumer associations, in particular we report Adiconsum (“over-indebtedness prevention” section) which in 1997 established a wear prevention fund .
There are also associations that specialize in providing mediation services to find a solution with over-indebtedness, such as Consumer Protection.