With credit rates showing historically low levels, credit repurchase is currently used very frequently by individuals who appreciate the possibility of having a single monthly payment. Focus on the advantages of buying back credit, but also on the disadvantages of such a financial transaction and the ways to get around them!
Multiple loans: the 4 main advantages of buying back credit
Reduced monthly payments, rebalancing of the budget, reduction in the risk of over-indebtednes. For the borrower, the advantages of buying back credit are numerous. To better understand, let’s see these benefits in more detail.
1 – Credit repurchase: a single monthly payment to simplify accounting
The repurchase of credit, also called regrouping of credits or restructuring of debts, consists of repurchasing several credits in progress being able to be of different types (car loan, real estate, with consumption, etc.), in order to have only one only loan to repay. The subscriber then has only one single monthly payment to pay, which makes it easier for him to find his way when doing his personal accounting.
Note: debt restructuring can take 2 forms
More specifically, the bank may offer the borrower either a buyout of consumer credit (for 2 or more consumer loans), or a buyout of mortgage (for a consumer loan and a mortgage at least).
Indeed, if an individual has taken out several loans of a different nature, it is sometimes complicated for him to have a precise idea of the size of his debts and his current capacity to repay. On the other hand, the repurchase of credit and its single monthly payment give him the possibility of clarifying his financial situation and thus of negotiating more easily, if need be, a new loan in the perspective of launching a new project (real estate, entrepreneurship , consumer purchase, etc.) or simply to balance your budget. The amount of this new loan will then be backed by the credit pool.
2 – A breath of fresh air for your budget
If the grouping of loans therefore has a practical side, the main advantage of buying back credit is to allow the individual to obtain lower monthly payments, through a spread over time of his debt. Whether it is because the individual can no longer bear his current repayments or because he wishes to renegotiate his loans at a more favorable rate, the repurchase of credit gives him the possibility of paying a single monthly payment and less costly than all his old monthly payments . united.
Although negotiated with a financial institution (bank or credit platform approved by the Prudential Control and Resolution Authority), a repurchase of credit can make it possible to reduce the amount of its monthly payments up to 50% or 60%. The borrower, on the other hand, will have to take into account the fact that the duration of his loan will be extended.
3 – Loan consolidation = risk of limited debt distress
The decrease in the amount of the monthly payments brings us to another advantage of the repurchase of credit: the operation protects the borrower from the over-indebtedness, since his debt ratio is lowered. The borrower will therefore spare himself the filing of an over-indebtedness file with the over-indebtedness commission, via the bank in his department. This is great news, you will no doubt agree. Especially considering the fact that a filing at the bank excludes the borrower from any loan consolidation operation. Morality: better to act before it is too late!
4 – Debt restructuring reduces the cost of insurance
Fourth advantage of repurchasing credit: the reduction in the cost of borrower insurance, enabled by our famous monthly payments which are transformed into only one during a repurchase operation. It seems logical: who says single loan says single loan insurance!
Good to know: the borrower can take out insurance elsewhere…
If the bank buying the credits offers insurance to the borrower, the latter is free to insure his loan with another establishment. The objective is of course to reduce the cost of insurance!
The limits of credit consolidation
Besides all the advantages of buying consumer or real estate credit, there are a few disadvantages. But may the borrower be reassured, they are by no means inevitable! This is what we will see right away…
1 – Potential increase in the total cost of credit
There is one thing to be aware of: the lengthening of the repayment term implies an increase in the APR (annual effective annual rate). Result? A potentially higher total cost of the loan than before the repurchase transaction. Ultimately, this can again weaken the borrower’s budget and put them at risk of over-indebtedness. For the borrower, it is therefore important to compare the total cost of the loan consolidation with that of the loans in progress, but also, depending on his situation, to lengthen the repayment period as little as possible. Online simulation tools and comparators are invaluable supports, allowing you to find the best buyout rate. Think about it!
2 – Additional costs
Depending on the situation, this total cost may be increased. The borrower could for example have to pay administration fees with his new bank, or IRA (early repayment indemnities) with the old one. It is therefore in your best interest to study all the conditions upstream!
3 – Loss of relationship with the bank
A relationship of trust and loyalty with its bank is built over time. However, if he calls on another bank to redeem his credits, the borrower loses these profits. However, in such a situation, he will quickly accomplish one thing: his old bank may not have been so advantageous in the end: it is another way of taking advantage of the loan buy-back! And then, over time, the borrower will be able to establish the same links with his new bank and, who knows, ultimately obtain much better benefits.
You know everything about the advantages of buying back credit! With us, benefit from a grouping of loans at advantageous rates, while saving yourself from prepayment penalties (whatever the amount of your redemption). With us, no hidden costs either, and a final response within 24 hours upon receipt of your complete file. Why make it complicated when it can be simple?