Debt consolidation with assignment of the fifth – Is it convenient?
Before tackling the chances of obtaining a debt consolidation with the assignment of a fifth, let’s try to understand better how this particular method of “restructuring or reorganizing” one’s debts works. The definition of debt consolidation refers to an operation (which is sometimes obtained through the assistance of a consultant, a specialized lawyer, etc.) through which you intend to reorganize your debt exposure, by signing a single loan to “consolidate” all other loans already in progress.
It is therefore clear that this loan must have very specific characteristics, in order to avoid rejection by the bank or the financial company consulted.
Why aren’t all the loans going?
When applying for a personal or finalized loan, the requested bank will carry out investigations, which on the one hand are used to see if:
- the applicant is reliable (therefore he is a good payer)
- if the income capacity is adequate for reimbursement
- if the debt exposure is not excessive.
In fact, when these assessments are made, the amount relating to each installment already in progress will be subtracted from the income available for repayment. So if there are already other loans, the risk that your “repayment” availability will be compromised is very high.
In order not to risk this happening, there are two possible solutions:
- apply for a consolidation loan
- request a transfer of the fifth to consolidate the debts already in progress.
Now let’s go to see the differences between the two modes, so as to identify the one that best suits your situation.
For specific consolidation loans: operation and necessary requirements
Debt consolidation without assignment of the fifth requires that a specific loan be requested. The various banks, and also numerous financial ones, offer at least one product that meets the requirements necessary for true debt consolidation, with rather high maximum amounts that can be requested (it can even reach the threshold of 100 thousand dollars, and in any case it is generally above of maximum amounts of 50 thousand dollars).
This type of financing has the following characteristics:
- the bank does not consider the loans already underway to assess the applicant’s repayment ability
- the determination of the maximum amount obtainable must be made on the basis of the repayment availability and on the basis of the amount of the loans in progress to be paid in advance.
Among the documents that must be delivered with the request for funding are:
- personal documents
- income documents
- settlement of all loans to be “consolidated” (including early repayment penalties).
Once the bank has taken charge of the complete practice of all the documentation, it will propose a loan with an installment that must not be greater than the sum of the installments that already exist. Indeed the purpose of consolidation is to make the repayment of loans more sustainable, so the installment should be less than this sum. Once the right solution has been found (even by slightly lengthening the duration to lower the installment, but by supporting a higher amount of interest), then the bank will not disburse the sum granted to the applicant, but will take care of early repayment of all the loans examined for their consolidation.
At this point the applicant will have one installment and one lender bank. In the event that among the loans to be repaid in advance there was also a transfer of the fifth, then we will proceed in the same way, since it is a type of loan that does not meet great limitations, except for renewal.
Consolidating debts with the assignment of the fifth: how to do it
For the granting of the assignment of the fifth, the requested bank (or financial company) will not enter into the merits of the level of indebtedness of the applicant. In fact, obtaining a preferential lane for repayment of the installments, seeing if the applicant’s installment income ratio is adequate, compared to other debts, is a waste of time (the only exception is with the foreclosures on salary, which follow the same repayment method provided for transfers, or with holdings upstream of the salary).
This method makes it possible to request the assignment of the fifth to obtain debt consolidation, taking advantage of a greater “flexibility” for repayments. The process will be completely different in the case of a debt consolidation with assignment of the fifth, as it will be necessary to deal with the various first-person assessments. Let’s see what we should do:
- calculate the sums to be repaid for each loan that you want to consolidate (be careful not to request the repayment accounts if you are not sure you want to continue, given that very often there are “calculation” costs)
- make estimates to obtain a sum equal to the sum of the loans to be repaid
- find the best compromise such as: duration, amount of the installment, actual “savings” compared to the loans already in progress (in general it is not convenient to remove loans that have exceeded two thirds or four fifths of their residual life)
- request the transfer of the fifth of the amount identified with the various estimates
- once the loan sum has been obtained, all the loans that are to be consolidated must be paid off.
Debt consolidation without assignment of the fifth is a specific product, which relieves of numerous tasks. The rates may be higher than the transfers of the fifth, but we must also consider the disbursements connected to the compulsory insurance which is not foreseen in the first case. So in principle they represent the most suitable solution. However in some cases the transfer of the fifth is preferable, especially if you need more liquidity, compared to that obtainable with a normal consolidation, or if you have a reputation situation cracked by reports as bad payers, or if you even return newly protested.
In both cases, given the need to evaluate convenience in a much more complex way than just the cost and interest rate component, it may still be necessary to use the help of an expert or a dedicated consultant.