What is a debt purchase?
When you have debts of different nature and with several institutions, it can be difficult to manage them, being at risk of default. If that is your current situation, you can choose to focus on a single institution through the so-called debt purchase. In this article we explain what a debt purchase is and what benefits it offers you.
What is a debt purchase and how does it operate?
A debt purchase is a loan granted by a financial institution to be used for a specific purpose. This objective is to pay one or several debts of different nature that you maintain with other financial institutions. In other words, the bank pays your previous debts and you acquire a new and unique debt for it.
Note that the debt purchase process is never reflected in your finances the money granted on loan. The capital passes from the financial institution granting to the others, without this movement being reflected in your finances.
The purchase of debt, also called debt consolidation , does not adversely affect your financial history. On the contrary, by allowing you to better manage your debts, it can help you improve your financial performance.
What benefits can you get in a debt purchase?
- As we already mentioned, it makes the management of your payments simpler by focusing on a single one.
- You no longer have to cancel the maintenance costs of your credits to different institutions. You only cancel one, which probably means a smaller payment for this concept.
- As long as you have a good credit history, you can get better conditions for your new loan, for example, less interest. This taking advantage of the fact that financial institutions tend to improve these conditions, as a competition strategy.
- In some institutions you can make advance payments of fees or contributions to capital at no additional cost.