How to pay back the loans?
Thanks to loans, we can immediately get things for which we would have to save for a long time. For example, a mortgage allows you to buy your own apartment, even if you have little savings. Without him, we would be forced to save for an apartment for several dozen years. It is similar with cars and other expensive things.
However, loans must be used wisely, as they can also cause problems. People who do not follow certain rules fall into the so-called a credit loop also called a debt spiral. It consists in the fact that a person in debt incurs more and more expensive loans to pay off previous debts. This is a very dangerous phenomenon, because relatively small debt can quickly grow to monstrous proportions.
Suppose someone pays PLN 500 cash loan installments every month. The interest rate on this loan is 13%. The borrower’s problems begin when he lacks money to pay the installment and decides to withdraw the amount from the credit card. In this way, he solves his problem, but only for a while. The interest rate on his credit card is 20%. In addition, you also pay a commission for each withdrawal from the card. Therefore, the debt increases much faster.
When such a person reaches the limit on the card, their next step is usually to try to get a new loan. If it cannot be obtained from a bank, it uses the offer of various types of loan companies that are not interested in the borrower’s financial standing. There, however, the cost of credit can be up to several dozen times higher. Therefore, the total debt can grow to gigantic proportions.
Experts advise that if we are in a difficult situation and want to avoid or break out of the debt loop, please inform the bank about your problems. Banks usually agree, for example, to extend the repayment period, thanks to which the monthly installment will be lower. In some cases, you can even suspend repayment for some time, i.e. use the so-called credit holidays.
A consolidation loan?
If we have debts in several banks, we can combine them into one consolidation loan. Such a loan is easy to obtain because it does not increase the debt. The money does not go to the debtor’s pocket, but to pay off earlier obligations.
The installment of the consolidation loan is usually lower than the sum of the previous ones, as the loan period is extended. However, it is important to take such action as soon as possible. If we have long delays in repayment, the banks will refuse to grant us a consolidation loan.