In general, a situation of over-indebtedness occurs when the household spends more money than it earns, that is, its expenses exceed its resources. The borrower then has several solutions that come his way, the first of which is certainly to contact all its creditors, with the aim of arranging or even suspending its repayments over a fixed period. A loan buyback operation is quite suitable because it allows to reduce the amount of the monthly payment. In this sense, it can help to get out of a situation of over-indebtedness and improve the financial situation in the long term.
The definition of over-indebtedness
A household is considered to be over-indebted when all of their monthly expenses, including the monthly installments of the various credits, are greater than their monthly income. He then finds himself with a bank account constantly debit, because he can no longer meet his debts. His debts weigh heavily on his budget and lack of resources, he can no longer have a good control of his budget whose management becomes complicated. The nature of its debts is not usually professional but personal, they often come from the subscription to several types of credits, such as consumer loans, mortgages, personal loans, revolving loans, bank overdrafts, unpaid bills and family or even tax debts.
The most common source of over-indebtedness is the accumulation of credits. Other parameters may also interfere with this phenomenon, for example when the household is facing a sudden drop in income, which is most often the case in the case of job loss, illness or ‘a divorce. To avoid the situation of over-indebtedness, the household can seize the commission of over-indebtedness. It is a public body managed by the Banque de France, whose mission is, on the one hand, to establish or not the situation of overindebtedness and, on the other hand, to find solutions to help the household in such a situation. situation. To benefit from this assistance, however, the latter must imperatively respect certain parameters, the main one of which is to continue to repay his debts as much as possible during the entire period of analysis and evaluation of the file. Of course, it will not be necessary to venture to subscribe new credits. Be that as it may, it is advisable not to let his financial situation become too difficult. As soon as the debt ratio approaches 33% (considered by banks and credit institutions as the maximum limit for a home) do not hesitate to contact a broker, a real financial professional, to estimate the situation.
To get out of a situation of over-indebtedness
When a household seizes the commission of over-indebtedness of its department and that its file is considered admissible, it will be able to benefit from solutions adapted to its situation. When the request is not accepted, other action plans can be considered, one of the most effective of which is the redemption of credits. This is an alternative in order to regain financial stability that will be managed by finance experts. Here too, the admissibility of the file will depend on several criteria, which are his family and professional situation, but also patrimonial, because there is a difference between tenant and owner.
The purchase of credit can improve the management of personal finances, and thus helps to get out of a difficult situation. Also known as debt restructuring or loan consolidation, the redemption of credits is a new loan that allows several loans to be collected in a single monthly installment. The amount of this will be less than the totality of the monthly payments cumulated before. Thus, the household expenses are rebalanced and especially diminished. It is important to take into consideration that this action lengthens the repayment term of the new credit put in place, and also its cost.
The redemption of credits has other advantages that make it possible to stop a situation of over-indebtedness. It has the security of a single fixed monthly payment, collected every month on the same day and over the entire repayment period of the single loan. It also means a single bank interlocutor, so simplified financial management. Another advantage is the lightening of the single monthly payment, which can be reduced significantly. As a result, the borrower finds a saving capacity which also gives him security and precaution. An important element of credit redemption is that it offers the applicant the opportunity to finance a new project. Indeed, it is possible to include in the total amount borrowed additional cash that will pay for a new acquisition such as a car or a computer, or to perform work for example.
The solution of the redemption of credits
There are two categories of loan buybacks: consumer loans that are granted for a maximum of 12 years and mortgages that can last up to 30 years. This most often implies that a property is put in mortgage, it is called mortgage redemption. Several laws have been passed in recent years to regulate the purchase of credit, but especially protect the consumer, as lenders. The Demort law requires them to send the borrower a standardized information sheet on the loan insurance and allows the borrower to opt for the one of his choice. The Hamon law, which came into effect in July 2014, allows the borrower to cancel the loan insurance taken out with his bank within 12 months. These measures make it possible to have a better visibility on the total cost of the purchase of credits.
The redemption of credits is a good solution against difficult situations resulting from the vagaries of life. In a case of loss of income related to a hard blow such as a divorce, a death, a job loss, he lightened the household budget put to the test, and allows him to take the time to find alternatives to bail out Bank accounts. When they experience the burden of overdraft fees, which are very expensive, and of various unpaid bills, be they fiscal or otherwise, the repurchase transaction rebalances the finances. Before getting a new loan, the household can also try to optimize their budget by reducing their expenses by asking for help.
Generally speaking, it is forbidden for a credit institution to grant credit to a person considered to be over-indebted, which is why it is better to deal with it as soon as the situation deteriorates and before it becomes irreversible. The candidate to buy credits must be in a debt level not exceeding 33%, or up to 42% in some cases. This limit has been set by banks and financial institutions, which are also the market players that offer the purchase of credit. Applying to a specialist broker is a good way to take advantage of valuable expert advice. A great connoisseur of the market, he also has a large portfolio of banking partners and will find the best solution for the situation, needs and especially the expectations of his client.