The redemption of credits is a banking operation which makes it possible to collect all the credits still in progress within a new loan by obtaining at the same time a rate revised downwards and reduced monthly payments. Before starting a loan consolidation, it is important to know how it works.
Why redeem credits?
Anyone can make a request to buy back credits for certain situations. Depending on the situation, the plaintiff in the Francia Bank’s national file and / or the central check file can also obtain a favorable answer.
In many cases, loan consolidation is a very effective tool when a household has accumulated too much debt. It allows to see clearly and significantly simplify the budget management of a family. One and only monthly repayment, the lower interest rate but also the possibility of being in contact with a single interlocutor, here are the benefits of a restructuring. In general, this is a solution that allows individuals to return to a balanced budget.
Another situation in which it can be particularly useful is the transition to retirement. Indeed, with a view to an immediate reduction in the household’s income, it may be interesting to turn to this type of operation.
Grouping loans in repayment can also be used to recover savings capacity. By saving money on the repayment of monthly payments, it will then be possible to put some money aside to realize future projects.
What types of loans are eligible?
Grouping of loans is possible with:
- Consumer loans: car loan, credit works,
- real estate loans
- revolving credits
- Credits contracted from a store
- debts related to an overdraft
In order to regain financial stability and improve the management of its budget, a loan buyback can take different forms. Thus, it is possible to group all the different credits accumulated or to group some only and keep the others as they are. For example, in some cases, it is more interesting to buy one’s consumer credit and the other to maintain a current mortgage that already has a favorable rate.
Regarding the number of credits that can be grouped, this can vary from one borrower to another depending on his situation. In general, it is possible to group up to 20 credits when they are not subject to a mortgage. For mortgage loans, the maximum number is 7 different contracts.
How to find the best deal?
To find the best offer, there are two options for a borrower: search and simulate online or contact a professional broker. In the first case, it is possible to compare the various offers available on the market via the platforms that exist on the Internet. Once all the information is collected, the future borrower can get an idea of the possibilities open to him. When you have selected several offers on different platforms, then just perform a simulation. Totally free, it only requires some personal and financial information such as the borrower’s income, the number of loans involved in the future buyback operation or the capital remaining to be repaid. At the end of the simulation, the borrower will receive a complete quote sent by e-mail or telephone. Do not hesitate to ask for more because depending on the institutions, the proposals may diverge.
When you want help from a broker, you will have to be ready to pay a commission when the redemption request is made. This is a quality intermediary because as a financial professional, the broker is able to find the most suitable offer for the situation of his client. In addition to the time savings it can achieve, it will also take care of all administrative procedures. This is a considerable advantage and saves a lot of time.
Why build a solid file?
A solid record is the key to the success of a buyout contract. Indeed, the more it is consolidated, the greater the chances of obtaining an attractive offer and the validation of the request by the lending institution. The file allows the credit institution to have a concrete and complete overview of the situation of its future client. It ensures its repayment capacity and protects itself against any risk of non-repayment.
The mandatory parts for an owner are:
– valid ID
– copies of the housing tax and the property tax
– a bank account number
– the last three paysheets of the borrower
– the last tax notice
– all proof of income (allowances, pensions, grants)
– the last three bank statements
– the copy of the amortization schedule and the loan offer (consumer credit and / or mortgage credit)
– the copy of the complete title deed
– home insurance
– an estimate of the property done by a notary
The study of the file will be carried out by the executives of the establishment to ensure the solvency of the borrower. At the end of this analysis, the bank will transmit its positive or negative response.
What are the costs?
If a redemption of credits allows for savings, some costs must be taken into account before embarking on this operation. Among them, it will anticipate and calculate the compensation due in the context of the early repayment of certain credits that can sometimes be high. It will be necessary to be vigilant because these can not exceed 3% of the capital remaining due for a mortgage. It is capped at the rate of six months of interest on the repaid capital.
With regard to consumer credit, prepayment allowances can not exceed 1% of outstanding capital when there is more than one year of repayment and 0. 5% when there is less than one year.
Another type of cost to take into consideration: the famous fees required by some banks for all transactions. They can thus be between 1% and 7% of the total amount that was bought back. They will only be asked of the borrower after the validation of the contract and the release of the sum.
Insurance fees will also be payable. If it is not mandatory, borrower insurance is essential in most institutions. The amount of the insurance contribution will vary according to the age, state of health and professional status of the borrower.
When the arrangement concerns a mortgage, the mortgage and / or bond must also be included in the calculation made by the borrower to assess the profitability of a loan consolidation transaction.
Once all these costs are taken into account, the borrower can get an idea of the profitability of his future buyout project. The goal is to save money, it is necessary that this operation of regrouping does not cost more to him than what it has to repay.