Several economic factors may have led households into a difficult financial cycle. Crisis, increased cost of living, stagnant wages, all situations that can lead to excessive debt. By dint of not being able to save, homes are turning more and more towards credits, but when they become too numerous, the situation becomes inextricable. This is where the purchase of credits comes in, a financial operation that will restore order to the finances by collecting all outstanding loans in one loan. The borrower’s debt ratio can then be revised downwards again, as can the single repayment payment.
Over-indebtedness and its consequences
Over-indebtedness is a situation that can occur at any time, when the home is suffocated by too many credits. Whether it’s a loan to buy a new car, a new kitchen, a trip, etc. all these consumer loans, personal loans or revolving credits were contracted for lack of savings in which to draw. The household may not only have problems meeting the monthly deadlines, but also find it impossible to pay current expenses, bills and other fees.
This is where we talk about overindebtedness, that is, the financial burden is greater than the household income. If it occurs most of the time because the individual consumer has largely exceeded its ability to repay by subscribing to different loans, it can also be the cause of a change in employment situation, with a decrease in income for example. Sometimes it can be a hazard of life such as a job loss or illness.
The consequences of over-indebtedness are often catastrophic. The borrower may end up paying significant additional fees in addition to loan maturities with their interests. These penalties include: the intervention fees invoiced by the banks for each transaction above the authorized debit limit, the fees for the deduction of withdrawals, bank overdrafts, penalties for late payment, ATD expenses and bailiff. Another very serious consequence: sometimes a property must be sold and all savings must be terminated.
The solution to overcome this impasse then remains the filing of an over -indebtedness file with the Francia bank. A commission will then decide whether to accept the application and the borrower will be subject to very strict rules regarding the management of its finances and expenses. It will be automatically indexed to the Personal Credit Reimbursement Incident File (FICP) and will not be able to subscribe to any credit for the entire period of the procedure. The commission will impose a repayment plan on creditors and debtors, the interest rate may be reduced, payments may be suspended temporarily, and for the less solvent, the debts may even be erased.
Redemption of credits to get the head out of the water
The purpose of a loan buyback operation is to allow the household to regain its financial serenity. This is a process for which all credits subscribed will be combined into one new credit. These different loans can be of different types, ie consumer loans such as car loans or work, personal loans, real estate loans, revolving loans. What counts above all is to reduce the monthly charge that the borrower spends on the repayment of the credit, for this the financial arrangement of the redemption will consist in reducing the monthly payment. This will be adapted to the income of the household and may in some cases be reduced by up to 60% compared to the sum of old monthly payments combined.
Of course, to regain this comfort in terms of finances, it will be necessary to make concessions, it is in this case to increase the repayment term of the new credit, which will increase its total cost. But beware, there is also a non-negligible advantage, it is the interest rate that will fall. This is the specificity of the redemption of credits, this ability to renegotiate loan conditions. The rate is always renegotiated and revised downwards relative to the rates of the old credits in progress. This is particularly noticeable in the case of a mortgage repurchase because current rates are well below those of a few years ago.
In short, the redemption of credits is a real restructuring of debts. In this sense, it avoids the restrictive procedures of an over-indebtedness file. The situation can be largely cleaned up thanks to simplified management, since there will be only one credit to repay, just like a single contact to contact. So it’s better not to wait until you have too much debt to use it. In addition, many specialized brokers and intermediaries in banking and payment services specialize in this type of operation and will be able to find the most appropriate solution and the best conditions.
The purchase of consumer loans
It is part of the category of faster credit buybacks because it only concerns a certain type of loans. All credit related to a credit conso can be integrated therein, so that the borrower remains only one monthly repayment. These are personal loans devoted to the consumption of daily living expenses, credits allocated to the financing of a particular purchase (car, motorcycle, works, kitchen, etc.), revolving loans (cash reserves put at the disposal of the consumer by a creditor and which is renewed with each use).
The maximum amount of consumer loans that can be repurchased is fixed at 7. In some cases, there are exemptions, particularly in the case of revolving loans. It should also be noted that some debts may be included in the redemption operation, such as late rent, unpaid bills, family or personal debts, etc.
Last but not least, a consumer credit buyback transaction allows for additional cash flow for the borrower. This means that with this money he can finance a new project or a purchase.
The repurchase of mortgage
It works like buying back consumer loans except it only concerns real estate loans. To be included in this category, the share of real estate credits included in the redemption must be equal to or greater than 60%. Here again, the duration is rescheduled and the amount of the monthly payment is set up so that it is lower than the previous monthly payments collected. It can therefore include the current home loan and one or more consumer credit. This is another way of understanding overindebtedness.
It often happens that the repurchase of real estate credit requires the putting in guarantee of a property, one speaks then of repurchase of mortgage credit. This may allow the borrower to have access to certain benefits such as a preferential rate, less stringent credit agreement criteria, and why not additional cash to finance a new real estate project, such as renovations or residences secondary for example. The mortgage is considered a solid security for banks and financial institutions.
The procedure of setting up is however longer because it involves the passage to a notary to establish the notarial act. This generates fees to be considered in the redemption transaction.