The repurchase of consumer credit is a banking operation allowing people who have accumulated several consumer credits to combine them into one to reduce their monthly payments .
If you have a mortgage that you do not want to combine with your consumer loans, you can also use it.
The bank reimburses your loans to your various creditors and gives you a new credit for the amount of what you had to repay . It can also grant you additional cash.
Interest on consumer credit redemption
This new loan is either spread over time (12 years maximum) or offered at a lower average interest rate, which systematically reduces your monthly payments and therefore your debt ratio.
The repayment periods vary depending on the nature of the credits to be redeemed and your personal situation.
The interest of buying back credits is therefore:
- Reduce your monthly payments: to have more budget at the end of the month. The objective is to increase your remaining living, that is to say the amount remaining at your disposal once all of your monthly expenses have been paid. This must be sufficient to allow you to pay for everyday expenses (food, clothing, etc.);
- Reduce your debt ratio: to get started in a new project. Although this is not an absolute rule, banks generally set the maximum debt ratio for taking out new credit at 33%;
- Unify your payments: to be able to forecast your expenses over time. With a single contact and a single monthly payment taken on a fixed date, you benefit from better visibility on your budget and easier management of your finances;
Summary of the example .
Total amount of loan redemption: $ 47,941. Total amount owed by the borrower: $ 67,093.20. Duration of the loan: 10 years. Fixed debtor rate: 7.10%. Fixed APR: 8.65%. Optional credit insurance: $ 5.99 per month, i.e. $ 718.80 over 10 years.
What consumer loans can we combine?
All consumer credit can be combined into one:
- one or more personal loans, including appropriations allocated to work types;
- auto loans;
- revolving or revolving credits;
- leasing or LOA (rental with option to purchase, except the first year, for which the vehicle can be bought back at the rate provided for in the LOA contract);
- bank overdrafts, considered to be consumer loans;
- additional cash to be included in the repurchase of credit, in order to finance a project such as a vehicle purchase or works.
It is also possible to include personal debts in the purchase of consumer credit:
- tax delays;
- co-ownership charges;
- rental delays;
- family debts or amounts owed to private lenders;
- an employer loan;
- bailiff debts;
- unpaid invoices (electricity, internet, water, gas …).
What is the maximum duration and amount for a consumer credit buy-back?
For a tenant, the financing can generally be spread up to 10/12 years for a maximum amount of $ 100,000. For an owner, funding can be spread over a maximum duration of 12/15 years in general, for a maximum amount of $ 200,000.
Please note, for owners: the purchase of consumer credit does not include the mortgage in the transaction . But a grouping of loans including the repurchase of a mortgage loan exists: it is a repurchase of mortgage loan, for which the mortgage loan must represent more than 60% of the total amount to finance so that the rate of regrouping of applied loans, that of real estate in terms of credit repurchase.
How to obtain a repurchase of consumer credits?
Before requesting a loan buy-back, it is important to define your objective beforehand:
- Allow the financing of a new project by lowering its debt ratio;
- Lower the amount of your monthly payments to increase the share of living expenses.
You must also collect the documents necessary to study your file, including:
- credit contracts and amortization schedules;
- proof of your income;
- your latest bank statements;
- the list of your fixed charges (rent, mortgage, etc.).
Depending on your situation and your project, other documents may also be requested.
Calculating your debt ratio will help you know your borrowing capacity. The method is very simple: you add up your fixed costs and divide them by your income, then multiply the result by 100.
Where to request a buyback of consumer loans
Numerous online comparators allow simulations and thus to study the offers of different banking organizations. It is possible to approach your bank, if you have taken out several loans from it.
However, it is also possible to be advised by a credit repurchase broker: an expert whose role is to understand your need and your interest, and to obtain the best credit repurchase solution among partner banking organizations, by depending on your project and your profile. He helps you build your file and accompanies you until the implementation of the credit buy-back solution.
Ensure the purchase of consumer loans
Some credit agencies will ask you to purchase credit repurchase insurance. The latter will take over to ensure the repayment of your loan in the event of a life accident.
The rate of loan insurance affects the total cost of the operation. Don’t forget to take an interest in the annual insurance rate. The Lite lender company on the delegation of insurance allows you to choose a contract with a third-party insurer, that is to say an insurance other than that offered by the lender. The advantage is that the rate will apply on the capital remaining due and not on the capital borrowed, the cost of the premiums will therefore be declining over the repayments.
One establishment agrees to buy back the credit for the $ 26,943 that remains to be repaid, via a new loan at 6.60% over 6 years. He also obtains an additional cash of 1000 $. His new monthly payments now amount to $ 510.20 and he can start his month at $ 1576.80 or $ 535.80 more than before the operation.
Summary of the example. Total amount of credit repurchase: $ 30,262. Total amount owed by the borrower: $ 36,734.40. Duration of the loan: 6 years. Fixed debtor rate: 6.60%. Fixed APR: 8.95%. Optional credit insurance: $ 3.78 per month, i.e. $ 272.16 over 6 years.