Face a decline in income
As retirement is synonymous with declining income, the financial situation of the household can be turned upside down by difficulties, especially when there are still several credits to repay. Loans taken during the working life invade the budget by monthly payments too high. The rest to live is low and the general indebtedness increases, impossible to continue to make projects or seize opportunities! This may be the time to think about redressing the situation through a financial transaction of redemption credits.
On the one hand, it will reduce monthly expenses in return for extending the repayment period, while on the other hand, it will have room to enjoy life and leave room for leisure. In addition, retirement is the time when you sometimes want to help your children and grandchildren, a cash reserve is desirable. Financing new projects, traveling or living a comfortable daily life without too much deprivation are all reasons to wish to release funds and balance his budget for this new beginning in life.
Definition of the redemption of credits
Several names characterize the redemption of credits. So it is also called loan consolidation or debt restructuring. Its main purpose is to lower the amount of the repayment of outstanding credits. It is therefore ideal when the retirement age approaches to anticipate the fall in income and the standard of living that accompanies it. But next to that, it also allows to finance a purchase or a project, in short to release additional cash. The grouping of credits is necessarily accompanied by an extension of the repayment term of the single credit which will replace those grouped together. It also helps to get a borrower out of an excessive debt situation.
The redemption of credits is classified in three different categories:
- The grouping of unsecured loans which concerns the renegotiation of consumer loans, but also various debts, late debts or invoices, and at the same time the financing of a purchase or project and a need for cash.
- Mortgage pooling reserved for homeowners. It allows to renegotiate real estate loans, even with a share of consumer credit, with better interest rates and repayment periods spread. It can also be used to consider new projects such as financing a new purchase and a cash contribution.
- The grouping of credit with bond that is set up when the owner does not want a mortgage.
The purchase of senior-specific credits
Banks and credit institutions obviously prefer to grant a loan buyback to people under 60 years. The reason is that it leads to an extension of the repayment period. The retiree is in this context an unattractive profile because it presents a risk.
Each application for the repurchase of credits will be studied with great care by the financial institutions. Loan consolidation brokers consider that the age of 65 or younger is positive because ultimately the retirement or early retirement pension is the best guarantee. Another important condition for obtaining an agreement in the context of a loan consolidation is that the borrower is not registered with the Banque de France.
For applicants over age 65, the conditions are hardly different. The eligible threshold of the retirement pension received will still be an important element in the bank’s final decision. The retiree’s file must also be of quality, that is to say without incident and with good account and finances.
The borrower insurance
For a senior, the health record is an important element when subscribing to a borrower insurance, the redemption of credits could appear fraught with pitfalls. And yet, the age limit is set by the banks (because of administrative constraints) to 85 years at the end of the loan. It concerns consumer loans as well as real estate loans and works.
The borrower insurance which is also mandatory when it comes to a mortgage, is especially recommended to ensure the risk of default of seniors. As banks are often limited when it comes to this age group, it is better to go directly to another insurance company for the implementation of delegated insurance.
On the other hand, guaranteeing its repurchase of retiree loans by a pledge (business, agricultural fund, securities, patent of invention, bank account balance becomes the guarantee of the debt without the owner losing possession of it) a special capital or life insurance is a great way to put the odds on your side. And of course the mortgage loan in case of consolidation of mortgage is an advantageous option since it provides a certain guarantee to the ability to repay the debt.
It is a question of giving in guarantee to the bank or the lending institution the good for which the loan is contracted. If unable to pay monthly loan payments, the property is seized and can be sold. The mortgage is expensive because it involves on one side the notary fees (notarial deed) of the other a rigidity because it faces very strict administrative formalities. However, it presents an advantageous guarantee for both the lender and the senior borrower, which will considerably strengthen the file. It is not suitable for small loans.
The advantages of buying mortgages are many, especially at the level of the interest rate revised downward. When the amount of the monthly payment is renegotiated, the finances of the household are often much better. Remediating the situation by consolidating credits also allows for better management of its monthly budget, even if the repayment period is longer. Too many credits stifle purchasing power but can also lead to a situation of overindebtedness. Consolidation of loans avoids all these financial difficulties.
The condition for using this type of credit pool is to have a property that is sufficiently valued. But it will also have a good ability to repay the new credit put in place.
The different types of credits to be bought back
The first category of credits that can be included in a credit surrender is consumer credit. It includes, among other things, the appropriations allocated (ie for a particular purchase, such as a car, a trip, etc.) and the unrestricted credits (free use of funds by the borrower) which are also personal or renewable loans.
Real estate credit includes all housing-related loans, whether for professional or personal use, as well as land intended for construction. It finances the acquisition of real estate, as well as its construction or renovation work if necessary. Consumer loans secured by a mortgage also fall under the mortgage system. The interest rates for this type of credit vary according to the length of repayment chosen.
The credit for renovating one’s house or apartment is an assigned credit that falls into the category of personal loans, named credit works. When the time comes for the pension at the end of a professional life well taken, it is also the moment when one wishes to have fun by improving its comfort and why not realizing a dream. This type of credit will make it a reality. Each borrower profile will be granted an amount depending on its repayment capacity.
Another category of loans is the car loan, which is used solely to finance the purchase of a car for an amount planned in advance. This can be new or used, with a rate of interest that varies from one institution to another. Care must be taken with the annual percentage rate of charge (APR), which includes the borrowing rate, interest, insurance and handling fees, as well as any other fees that may be charged for obtaining credit. Once the credit that finances the car subscribed, it will repay the amount in monthly payments until the end of the total duration of the credit.
The request for consolidation of credits
Before applying for senior credit redemption, it is possible to use a simulator. It is on the web where there are many, they are free and easy to use. By filling in the personal data and all the information on the credits still in progress, a first quick answer can be given. It makes it possible to compare offers and proposed depreciation tables, as well as the calculation of the debt ratio.
Supporting documentation to compile a loan consolidation file varies by bank or lending organization but is generally the same. This is a photocopy of the valid ID card, a bank account statement, proof of address. Next are copies of the last three monthly statements from each bank account and proof of income and employment status of the borrower or records of the retirement pension. To all these documents are added the tax notice, the rent receipt for the tenants or the property tax for the owners, the copies of the amortization tables of the loans still in repayment as well as the statements of the accounts. renewable credits.
Some institutions may offer tiered senior credit surrenders. It is a depreciable mortgage that offers a particular financing plan. The important point is that when you retire, the monthly payment drops. Its amount will depend on the estimate of future income (to be requested from the pension fund) once retirement is taken. This operation by step is also valid for a couple, in which case the loan will work with three levels of decreasing repayments (two reductions at the time of retirement of each co-borrower).
Requests to consolidate credits are made through their bank or another financial institution offering this service. Go through an expert to find the best deals and interest rates.