Paying off multiple loans can have a noticeable impact on your financial condition. Fortunately, a solution exists, the repurchase of loan makes it possible to group several loans which are in the course of refunding, in only one loan at reduced rates under the same monthly payment. A credit institution carries out the operation by paying off all of the client’s current loans and offers him a single loan. Credit consolidation, also called refinancing or debt restructuring, offers the borrower the possibility of regaining his purchasing power by reducing his debt ratio as well as his monthly payments by up to 60%.
The operation of the repurchase of credit
If you want to do a credit consolidation, here is the principle and the steps to follow for a debt restructuring:
– First of all, you must apply to a credit institution, that is, a broker or a bank.
– If the latter contacts you to give you an answer in principle, complete the requested file.
– Then, a loan offer is proposed to you and you send it back after having signed it.
– The institution will contact your creditors to repay your loans.
– Finally, your level of monthly payments is reduced, you only have one debt to pay at one due date.
Why do a credit consolidation?
Debt restructuring makes it possible to:
– Reduce charges that have become too heavy, due to various reasons such as too high monthly payments, a drop in income or tax delays.
– Regain purchasing power and savings capacity. Indeed, with the savings generated by the monthly payments, it is possible to put money aside.
– Get a better rate
– Finance a new project. If the debt ratio and the monthly payments are reduced, the financial situation will be restored and solvent allowing to invest in various projects which will improve the future of the customer.
Types of credit redemption
By making a repurchase of credit, you can group the credits according to their natures which determine the processing conditions. Thus, there are 2 types of credit consolidation: consumer credit consolidation and real estate or mortgage credit consolidation. If the share of home loans exceeds 60% of the total loan, the new contract will be a home loan, and if this share is less than 60%, the credit consolidation will be a consumer credit.
Consumer credit grouping
It concerns consumer loans and allows you to buy car and motorcycle loans, make renovations or simply to simplify budget management.
Real estate loan grouping
It concerns mortgages that are bought back on more favorable terms. Tenants and owners of a main residence can benefit from this solution as well as people housed by their employer or a third party.
The arrangements to be made when buying back credit
Even if this solution seems interesting, to avoid costly pitfalls or loss of tax benefits, it is necessary to take some precautions, namely:
– Check the total cost of the operation so that it does not exceed the cost of current credits.
– Study different proposals, do not settle for just one establishment.
– Refer to the amortization table to see the duration that has already elapsed for current loans. If it exceeds half of the refund, the penalties and the costs of the credit consolidation will make the operation unsuccessful, the redemption is profitable during the first third of the refund.
You can also consult this link for more information on the criteria to be monitored.
To buy back credit and to ensure that it will be advantageous, you must first determine the total amount, compare it with current loans, if these are higher than the cost of the consolidation, the operation is profitable.
