More than 800,000 families resort to reunifying debts to be able to pay them

A consumer analyzes his electricity bill. / r. c.

Asufin experts warn that extending the term to obtain a lower monthly payment also increases the cost of interest

Clara Dawn

CLEAR DAWN Madrid

The difficult economic situation generated by the energy crisis has put the family budget of many households in check, especially those that have not yet left behind the impact of the pandemic on their pockets.

Given this scenario, families are turning more and more to personal loans or credit cards to be able to meet their day-to-day expenses, including the mortgage. A short-term solution to liquidity problems but which, on many occasions, has led to over-indebtedness that they are now trying to solve through the practice of debt reunification. This type of operation basically consists of grouping all the debts of a home under the umbrella of a mortgage.

The escalation of the Euribor accelerates the requests to change the mortgage

According to the Association of Financial Users Asufin, a total of 800,000 families have resorted to these operations this year, 55,000 more than last. It is a solution that has the goodness of drastically reducing the monthly installment to be paid for all the debts contracted but that, in the long term, can suppose a huge extra cost due to the assumed interest charge.

This is one of the main conclusions of the III Asufin Study on debt reunification that the association’s studies department has drawn up in collaboration with the expert Luis Gallardo and that will be published in the coming days.

The firm has analyzed reunification operations of several non-bank entities that operate in the market. And the average reduction in the monthly fee to be paid that is achieved through them is notable: 75.2%.

The analyzed example includes an original debt of 121,410 euros, in which the mortgage debt, cards, personal loans, among others, are grouped. From there, the cost of interest on the initial debt is analyzed and compared with that of the selected reunification entities, reflecting the theory that the mortgages on which all these debts are ‘grouped’ by the entities make it possible to lower the monthly fee, but in exchange for high long-term interest.

The mistake of extending the deadlines

“The main problem with this type of operation is that the lengthening of the term increases the cost of interest: far from eliminating debt, as it may seem, it increases it,” they warn from Asufin.

For the examples of the entities analyzed (with real operations), the result is an average additional cost of the reunification operation of 71,000 euros, which implies multiplying by three the interest that would be paid with the initial debt. This is the result of subtracting the cost of the original debt of the analyzed example, of 21,091 euros, from the average cost of reunifying it, 92,110 euros.

The reason? The average rates applied for reunification are much higher than the market rates. In the cases analyzed, the average rate applied to the mortgage used for reunification stands at 3.9%, compared to 1.20% at which the Euribor was quoted in August, the reference month for the examples in the study .

Products that come together

According to the conclusions of the study, the bank card is the most frequent debt included in the reunification, present in 92.30% of this type of operation. It is followed by personal loans, which appear at 76%, and mortgages at 59.2%. Those that grow the most this year are, however, mini-credits.

Another of the problems that the experts have detected is that more than half of those surveyed for the study consider that they are saving with the operation. The percentage rises from the 48.3% who thought so the previous year. “The reality is that this feeling of savings is a mirage, because the total cost of repaying all loans has multiplied by three,” they insist from the association.

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