What is consolidated credit?

Consolidated Credit is a type of credit aimed at reducing your monthly payment burdens. If you have, for example, a personal loan, an Auto Loan, and a Credit Card, you can combine the three loans into one and start paying just a single installment. Resorting to consolidated credit can be a good option to continue meeting your financial commitments.

Thus, consolidated credit consists of a new loan that aims to:

– Combine all your debts;

– Pay only one installment;

With consolidated credit, you can achieve a reduction of up to 60% in your installment burdens.

Consolidated credit can be with or without a mortgage.

When to resort to consolidated credit?

The first signs that you should resort to consolidated credit usually appear when you start feeling a certain anxiety as payment dates approach and your salary is still far off. If you feel that you cannot manage the timely payment of your installments, you should take the initiative to analyze whether you can renegotiate your credits or if you should consolidate your credits. At this stage, it is crucial not to fall into the temptation of resorting to new credits to pay the installments of other credits. At other times, having multiple credits may lead to a new loan application being denied because your debt-to-income ratio may be too high, meaning your credits are poorly structured; talk to a specialist like Visão Financeira for advice and to find the best solution.

Will I pay more in the long run if I request consolidated credit?

It depends on the solution found and also on you. In this type of operation, it is important to assess the risk of potential losses, meaning that sometimes consolidating your loans may be the best solution to avoid default and the risk of huge problems and potential loss of the assets you have invested in. Depending on the type of solution found, we may obtain better interest rates that can offset possible increases in payment terms. On the other hand, if you create a monthly savings equal to the reduction of your installments, you may later use that capital to pay off your loans early, thus allowing you to finish paying off your loans sooner and benefit from reduced interest.

How to start a consolidated credit analysis?

It is important to identify and quantify the amounts owed on all your credits. You should also account for negative salary account amounts you may have used, amounts owed to family or individuals, future amounts you may need in the short term (for example, performing small repairs at home, a more significant repair on the car, etc.). A good way to start your analysis and preparation of the necessary documents will be to obtain the responsibility map from the Bank of Portugal; this map will contain all the amounts owed to the respective institutions. See here how to obtain the responsibility map from the Bank of Portugal.

What documents are needed?

– Identification document;
– IRS declaration from the previous year;
– IRS settlement note from the previous year;
– Copy of pay slips from the last 3 months;
– Proof of address (electricity bill, water bill, etc.);
– Proof of IBAN;
– Credit Responsibility Map from the Bank of Portugal;
– Proof of debt for all credits to be consolidated.

For self-employed workers, the following will be necessary:
– Print/Summary of billing from the e-fatura portal for the current year;
– Information or declaration of commencement of activity.

In cases where the loan grant requires real collateral (mortgage), it will also be necessary to present the property documents, namely:

– Property registration booklet;
– Certificate of property registration;
– Plan (if available).

Is it difficult to get approval for consolidated credit?

This type of credit tends to be particularly well analyzed by credit institutions because, after a consolidation, the relief from monthly installments is quite significant and may tempt you to take on new loans again. Depending on the amounts owed and also depending on whether you have collateral (property for mortgage), consolidated credit may be a personal loan, usually with a term of up to 7 years, or it may be a mortgage on your home where the interest rates will be much lower and the term will be longer (up to 30 years). When there is a need to proceed with a credit consolidation, it is important to understand the reasons and purposes that led you to obtain those credits (for example, during periods of illness, unemployment, loss of income, an unexpected breakdown, etc.); if you have a good justification, it will be easy for the bank to understand.