So, all the negotiations will have to happen by taking that into context.
between both the parties.ĭescription: Distributive bargaining is also known as zero-sum negotiations because the assets or the resources which need to be distributed are fixed. It is used as a negotiation strategy to distribute fixed resources such as money, resources, assets, etc. The borrower would now have to make one payment instead of making multiple payments to other creditors.ĭefinition: Distributive bargaining is a competitive bargaining strategy in which one party gains only if the other party loses something. By doing this they save on interest as well as the finance cost of the small loan owed by them. However, in the process the tenure was increased to pay off the loan.ĭebt consolidation is used by consumers to pay off a small debt in one go by taking one big loan. They might be able to lower the easy monthly instalments or EMIs to around Rs 6000, and consolidate both the loans into one. The borrower can reach out to debt Consolidation Company to understand the structure. The monthly payment for both the loans comes out to be around Rs 11000 which includes a payment of Rs 5170 from loan 1, and another payment of Rs 5830 from loan 2. There is another loan of Rs 2,00,000 which carries an interest rate of 10 per cent annually. For instance you have a loan obligation of Rs 3,00,000, which includes a two-year loan of Rs 1,00,000 with an interest rate of 12 per cent.
Let's understand the concept with the help of an example. Identify your debt(s) obligations, the total amount that you owe the lenders, time period or tenure, apply for a consolidation loan, once you receive the loan pay off other debts, stick to the payment cycle of the consolidated loan. There are some steps which borrowers should follow when they are planning to consolidate their debt. Education loan, amount owed on credit card, personal loan are some examples of unsecured loans which can come under debt consolidation. The borrower would now have to make one payment instead of making multiple payments to other creditors.ĭebt consolidation can happen on debts which are not tied up to an asset. Here, the amount received from the new loan is used to pay off other debts.ĭescription: Debt consolidation is used by consumers to pay off a small debt in one go by taking one big loan. Definition: Debt consolidation means combining more than one debt obligation into a new loan with a favourable term structure such as lower interest rate structure, tenure, etc.
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