By accumulating credits from financial institutions, it is sometimes difficult to calculate its monthly payments. We can easily find ourselves in the red and have trouble getting away without miraculous intervention. However, it is important to distinguish between being indebted and over- indebtedness.
Difference between indebtedness and over-indebtedness
Any consumer of credit will, at one time or another, face indebtedness if they accumulate different loans from credit institutions. This situation is not at all critical, but normal in that you can keep track of your expenses and cash flow. A debt effectively requires a good balance between these two aspects. However, indebtedness puts you in a situation of discomfort or you perceive slight delays in the payment of your monthly payments with your bank. A minor problem that can easily be solved.
In terms of over-indebtedness, it is the inability of a household to honor its long-term commitments to its bank, without the possibility of a solution. This kind of situation places you in a context of over-indebtedness where the only alternative would be to go to your bank to find professional help.
What causes over-indebtedness?
It is not expected to collapse under the debts and to have no solution to remedy it. This situation may happen to households that do not monitor the report: expenditure-charges-income. Indeed, with a large number of credits contracted, all households may find themselves easily in the red without seeing it coming. An accumulation of credit from different banks is often the main source. Since this implies different rates, different monthly payments and unshared benefits.
What solution in case of over-indebtedness?
If you only want to stay in a simple debt situation where you still have control over your expenses and credits, do a good financial study. Indeed, a meticulous calculation of all the loads which you must fulfill is necessary. In parallel, you must also deduct all your expenses from your income and estimate your ability to repay. The best situation would be to be able to save money to prevent unexpected events.
However, if you run out of debt and no longer have a solution on how to pay your creditors, opt for a credit redemption. This financial operation is based on a grouping of all your credits in ONE single loan. This means ONE monthly payment, ONE APR and ONE credit to manage. For detailed information, contact a broker for advice.
The blur that hovers below the credit formulas is not new. Many individuals and credit consumers complain about the lack of transparency of some financial institutions.
However, because of their duty to inform and the law governing credit in Europe, all customers must be aware of every detail that affects their credit. The latter, therefore, is the main concerned in the contraction of a credit. You also have a duty to ask for more clarification on the procedures and all that concerns a loan offer, especially for personal credit. Banks also encourage you to directly test their personal credit comparison online to be better informed.