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Grouping debts – Settle your debts and reduce your fees

The reunification of debts is a financial solution created with the objective of saving each month since it allows grouping the debts and obtaining a single payment, which is lower than what we pay per month by adding all the debts. Below, you will find answers to the most frequently asked questions about grouping debts to help you make the best decision. In addition, we present a table with some of the best mortgages of the moment.

Group debts: is it a good option for me?

When we want to reduce the fee and order the finances, the payday loan debt settlement can be very useful. However, this is not an option that is easy or convenient for everyone. Once we know the real options we have to group the debt, it is advisable to analyze and negotiate each proposal. We can calculate the mortgage and know how much we are paying each month for it, and thus know if it is worth grouping debts or not.

What is the use of reuniting debts?

If we want to group debts, we will achieve a lower global interest and pay less for our loans at the end of the month. In this way, all the debts are grouped in the same loan and therefore we will have more liquidity every month. Although we must bear in mind that a reunification of debts may be the last opportunity we have to cancel our defaults, therefore we must change our attitude towards spending. This is so because nothing will help us to group debts if we continue to spend money compulsively.

Why is the monthly payment reduced?

The reason why we will pay less money each month if we choose to reunify our debts is that with this operation a mortgage loan with a long-term is normally contracted, something that will allow us to pay off the grouped loans together and in more time. Of course, we must bear in mind that, as we will take longer to cancel the loan, the final cost of the product will be higher, since more interest will accrue.

Also, when grouping all the debts into one, the interest applied on the outstanding balance is usually reduced, especially when the mortgage is reunified with several personal loans or credit cards.

Why does the total cost increase?

It is true that with this operation it is possible to reduce what we will pay each month for all our loans. However, this decrease is not free, since in the long run, we will end up paying a higher amount in interest than if we amortized the loans separately. By unifying the debts with the mortgage, all of them are reimbursed in the repayment term of the mortgage loan, which is usually much longer than the other loans. Therefore, as interest is accrued for a longer time, it ends up paying more in the long term.

How much does it cost to group debts?

A practical example of debt grouping

Consider the following case:

Debt Term Outstanding capital Interest Share
Mortgage 20 years € 65,000 3 % € 360
Credit card   € 7,000 18% € 212.05
Car loan 8 years € 15,000 8% € 212.05
Personal loan 6 years € 6,000 twenty % € 100

If we add our debts, we owe a total of 93,500 euros and pay a monthly fee of 934 euros.

We decided to start a process of debt reunification, which has the following expenses:

  1. Commission for cancellation of the mortgage (usually 0.50% for the first five years and 0.25% for the rest): 163 euros

  2. Cancellation expenses (notary, agency, property registry and other expenses): 743 euros

  3. Commission of the broker or financial intermediary (approximately 3%, although it varies according to the broker): 3,045 euros

  4. Commission for the opening of the new mortgage (2%): 2,030 euros

  5. Opening expenses (agency, notary, registration, and appraisal): 1,000 euros

  6. Tax on Documented Legal Acts (IAJD): 1,015 euros

If we add the expenses, we have a total cost of the operation of 7,995 euros. This figure is usually added to the new mortgage. With which, if we add this figure to the 93,500 euros it owed, we have a mortgage with an amount of 101,500 euros.

When is the reunification of debts a good option?

The reunification of debts is a good option if we have contracted debts to a high rate but we have a good part of the house already paid or if the non-mortgage loans are very expensive and we have economic difficulties to make ends meet.

Who can I ask for a debt reunification?

We have two options to request a reunification of debts:

  • Preferably to a bank or intermediary.

  • There is also the option of private capital. In this case, it will be essential:

    • Be sure that we can respond to the debt, since, otherwise, they will not hesitate to initiate an attachment process.

    • Have professional advice. It can be an economist, a lawyer or any other professional specialized in finance.

    • Keep in mind that private lenders charge very high fees.

When should I hire an intermediary or broker?

It is advisable to hire the services of an intermediary or broker if we want to group debts but:

  • If we do not have sufficient financial knowledge to calculate which option benefits us the most.

  • So that the negotiations with the bank are more fruitful.

  • If we are willing to pay someone to get better conditions.

Of course, we must be clear that if we resort to these professionals we will have to pay their fees, which are usually high.

When should I go to private capital?

It would be convenient to resort to private capital:

  • As a last option and always with the support of a lawyer or professional.

  • If you are very sure of being able to respond because in case of non-payment the seizure proceeds quickly.

Our tips to save the most if you reunite debts

Here are some tips you can use if you decide to reunify debts:

  • Search in more than one entity at a time, at least in three banks at the same time. 

  • Look at all the conditions of the offer, not just the interest or the resulting fee. Recall that a mortgage is an operation of great importance, which will condition our family economy for many years, even decades.

  • Always ask for a forecast of expenses and commissions (with intermediaries and banks).

  • Check that your new fee does not exceed the sum of the current payments.

  • Try to always negotiate.

  • If we achieve reunification, it is important to change our mentality regarding money: abandon financial excesses (credits, excessive purchases, among others) and understand that this is the last opportunity we have to put our debts at 0.

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