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Definition of consolidation loan

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A consolidation loan – an agreement between a bank or other authorized financial institution and a borrower where the bank repays the borrower’s current financial obligations and offers to him in return one loan being a consolidation of previous obligations. Consolidation of loans

A consolidation loan is a banking product that enables the borrower to swap all of their existing liabilities for one loan with a decidedly lower installment.

The consolidation loan enables repayment of various financial liabilities. Individual banks in their offers enable the repayment of various types of loans and credits taken out. The most commonly used ones include, among others, liabilities arising from:

  • debit on a personal account,
  • credit card debt,
  • cash loans,
  • consumer credit,
  • installments from purchased products,
  • car loan,
  • housing loan.

A consolidation loan is an excellent opportunity to reduce the monthly costs associated with the need to pay installments arising from various liabilities.

The term “consolidation” comes from Latin and refers to the consolidation of the matter or the connection of various things to a stable whole. understands different things by the term “consolidation” of economics and business administration. Economic consolidation takes place when it comes to the economy of a given country after a period of recession or depression to reverse and put economic data positive signals again.
Consolidation in the industry

Consolidation loans

This situation applies to enterprises, households and the public sector under the same conditions. Numerous loans short-term loans in the long-term to be modified. The background can be, for example, temporarily better rates. In addition, consolidation of several loans into one simplified control of financial flows: previously passed a number of short-term liabilities from several creditors, also facilitates consolidation of debt with only one settlement creditor.

consolidation loans may also occur in the context of long-term liabilities that have not yet been incurred. In this case, it is not a short-term loan, but it is replaced at the moment when the donor for long-term financing can be found. Bridging loans can also be a precursor to long-term financing.