High inflation and rising interest rates increasingly complicate the situation of Spanish households and those considered highly indebted, who allocate more than 40% of their income to repay loans, already over a million and moderate can be. The Bank of Spain estimates that in the current situation the proportion of households with debt, which will have a high financial burden, will increase by about 4 percentage points in Spain, which is translates to approximately 350,000 homes will be highly indebted.
According to the Financial Survey of Families, 10.9% of indebted households at the end of 2020 more than 40% allotted of their income to pay for these commitments, which would amount to approximately 1.17 million households; Although the figures so far in 2021 and 2022 are unknown, if it reaches 15%, the figure will already exceed one and a half million. Faced with this reality and the potential growth in Euribor, the main indicator of Variable Rate Mortgage Reference In Spain, the Financial Education Day celebrated on this Monday becomes even more important for the society to acquire some basic concepts more informed decisionSuch as the possibility of converting a convertible mortgage for a fixed mortgage.
The Bank of Spain, on the bank customer portal, recommends taking stock and assessing change thoroughly, but if you eventually decide to switch from a variable rate mortgage to a fixed rate one, it states, it should be There are three ways to do this: one innovation, one Offering or a new mortgage, In the first case, the customer will resort to his own bank to change the terms of the mortgage and, if he is convinced of the offer, which he will have to study and formalize before a notary, pay him a commission The unit will be based on the outstanding payment amount.
However, in a settlement, the customer transfers his mortgage to another institution. To do so, the new bank will have to submit a binding offer with new mortgage terms, although its previous unit has the right to match it or improve it. The costs associated with offering a mortgage are usually higher than for innovation, recalls the Bank of Spain. For the most severe cases, from the Callisto portal they propose a reduction of interaction with the entity or an extension of the amortization period, although they warn that this can have negative consequences in the long run. In any case, they will be more bearable than the option of having to resort to loan reintegration, as explained by AsuFin, an association of financial users.
Reunification can triple interest
Bank card is the most frequent loan that is involved in refinancing, currently in 92.30% of these operations, followed by personal loans, with 76%; With 59.2% and mini-credits, which are already at 42.3%, Asufin says. However, the main problem with debt reconsolidation is that it involves additional costs and is Association’s average figure in over 71,000 eurosCompared to the 21,000 euros that a typical family supports with a mortgage and loan.
In other words, the total payment of interest after reconsolidation of loans triples the payments made without resorting to that formula, although there is a hook that Reduce the fee paid by the customer, which explains why more than half of users believe they are saving. “The reality is that this sense of savings on monthly fees is an illusion, as the total cost of paying back all Debt multiplied by three“, they point out to Asufin. In most cases, the way to renegotiate loans is to sign a mortgage, although about four out of ten operations use a personal loan.
Starting with the assumption of a family that allocates 2,271 euros per month to pay off its debts, which includes mortgages and various personal loans, In addition to financing with the card, reintegration can reduce monthly fees to €528.49, which represents a reduction of 76.7%. In the short term, the positive outcome is “obvious”, since the PLR, which that impression was 71% Because the family income was 3,200 euros, it dropped to an average of 17.60%, well below the recommended 30-35%.
The main problem with this type of operation, warns the association, is that prolonging the term increases the cost of interest: away from eliminating the debt, As it may sound, it enhances it, If the weighted average period (taking into account the weight of each loan contracted in the example) was 6 साढ़े years, it now becomes 30 years, that is, it increases by 23.5 years (4.6 times).
The interest rate on the existing loan of the same family was 5.41% and with the reinstatement Average drop of 3.92%, a reduction whose effect is diluted by increasing the term, meaning that interest is being paid for a longer period of time. All this is transferred to the price of the loan, which increases by 336.70%, Equivalent to a payment of more than 71,019 EurosAs interest, resulting in deducting the cost of the original loan of 21,091 euros, from the average cost of re-integrating it, 92,110 euros.