By turning to credit to finance various purchases and projects, the debts accumulated and the monthly payments end up weighing too much on the budget. In addition, it is impossible to track repayments because too many deadlines are to be managed. The solution? A loan buyback operation that will allow all outstanding loans to be collected. There will then be only one loan to repay, for which the interest rate and conditions can be reviewed. The procedure is a real banking operation that must be organized and for which an analysis of the debt situation and the needs of the borrower is necessary. The lending institution will therefore carefully study all the parameters of household income, to determine the amount of the monthly payment.
Define needs and borrowing capacity
To begin and before you even make an application, you need to establish an inventory of all debts and credits in repayment. This will help to prepare a clear and complete file to file the right time, with an overview on all monthly deadlines. The credits that can be bought back are consumer loans in general. These include credits allocated to a purchase (car, motorcycle, swimming pool, kitchen, etc.) or a personal project (work, travel, etc.), but also personal loans, which are credits that can be subscribe to a bank or credit institution without the need to provide proof, quotation, purchase order or invoice. On the other hand, this credit category also includes revolving loans, which represent a sum of money made available to the borrower and which renews itself automatically with each use. This type of credit has very high interest rates, which are around 20% on average. Making a purchase of credits that will absorb the revolving credits makes it possible, among other things, to lower the monthly payment and to benefit from a fixed rate.
The redemption of credits may also include a mortgage, that is to say a credit that is intended for the purchase of real estate, or to its construction. The conditions for a combination of loans including a mortgage are identical to the purchase of consumer credit, but it requires that the share of real estate is a minority. If it exceeds 60% of the amount borrowed, it becomes the majority and in this case the redemption will be considered real estate, with specific conditions and a specific interest rate. Other debts may be included in the redemption, we talk about late payments of certain bills (taxes, electricity, insurance, various expenses, etc.) or debts contracted in a personal capacity from a family member or from a close friend for example.
Then, to define its borrowing capacity, it will be necessary to establish the complete list of incomes (salary, retirement pension, family allowances, housing allowance, income from land, rent, annuities, alimony, etc.) and household expenses ( rent, bills, insurance, recreation, income taxes, housing or land tax, etc.). This action will make it possible to define precisely what is the monthly sum that can be attributed to the repayment of a monthly installment of credit. By establishing this budget, this will help to define the home’s debt ratio. Established by banks and credit institutions at a maximum of 33% for the granting of a loan, it may vary according to the situation and the guarantees provided by the borrower.
Finally, it is possible to include in the credit buyback operation an additional amount of money dedicated to financing a new project. This is for the borrower to take advantage of the redemption transaction to make a new purchase that will be added to the new credit. A good way finally not to remake a new loan but to integrate this acquisition in the financial package while respecting the conditions of indebtedness.
Tips for redeeming credits
Deciding to redeem credits is a reasonable decision to restore finances, provided that you are well prepared. To put all the odds on his side, we must respect certain rules, the first of which is the submission of a complete and the most solid file possible. This will especially allow the request to be processed as soon as possible. Secondly, we must ensure a stable situation, as banks are very sensitive to customers who have a regular and smooth job situation. This does not necessarily mean that you have to be a permanent employee, even if this is an asset. Regular income, a job for several months on fixed term, a retirement, and even a liberal profession are quite accepted. The important thing is to be able to prove the sustainability of its income and thus its ability to repay.
In parallel, the bank that will grant the new credit under the repurchase will also be very watchful on how to manage its money. The borrower also has the obligation to include in his file the last statements of all bank accounts, so in case of payment incidents and rejection levy, it is better to wait a little before depositing an application for loan consolidation. Having savings (savings account, housing savings plan, securities account, etc.) is still well received by banks. The frequency of spending is also observed because a borrower who spends too much and often has overdrafts does not reassure the financial institutions. Finally, the debt ratio must be reasonable, adapted to the profile of the borrower and above all meet the internal criteria of the financial institution. In a second step, he will assess the repayment capacity of the borrower. For this purpose it will calculate the exact amount to be borrowed by adding up the remaining capital due from all the loans, the debts to be included in the operation, the amount of the prepayment penalties, the costs related to the new credit agreement (insurance, fees and guarantee). He will then propose the most optimal solution with the most appropriate monthly payment and duration.
When the borrower owns his home or other property (second home, investment housing, etc.), it is easier to obtain a purchase of consumer credit. Unlike the real estate mortgage repurchase financial institutions are not going to require mortgage collateral and the timeframes will be shortened. The constitution of the file as it is a step that can take time, because it will gather all the required supporting documents.
Choosing the right intermediary in the purchase of credits is essential because it is he who will take care of all the administrative procedures, from the constitution of the file to the release of funds. It can offer several offers to the borrower through its network of banking partners. He is also able to maximize the chances of a request being accepted by his great expertise and his thorough knowledge of the market. With him, the deadlines will be shorter and it will be a real guide for the choice of the good monthly payment and repayment duration according to the profile and the situation of the borrower. He will be able to point out important criteria such as the total cost of credit, and guide the borrower in his choice.