Two main reasons can push a borrower to redeem his credits: an unbalanced budget no longer allowing him to meet his monthly payments, or an additional need for cash to finance a new project. In the latter case, a new loan will be backed by the credit repurchase. Naturally, for this operation to be profitable, the borrower will want to obtain a buyout of low-rate credit. Here are our tips to achieve this!
Credit repurchase: the main principles of this operation
During a credit consolidation (or redemption) operation, the bank merges the credits in progress to give rise to only one single loan. This loan is subject to an extension of the repayment period, so as to reduce the amount of the monthly payments. Whatever the borrower’s motivations, the purpose of a loan repurchase remains the same: to reduce its debt ratio. The borrower can then rebalance his budget and gain purchasing power. Depending on his situation, he can also choose to validate a loan offer in parallel, which will be grafted to the grouping of credits. As mentioned in the preamble, this cash will be used to finance another project.
There are two types of credit repurchases:
- The repurchase of consumer credit, which concerns only consumer credit;
- The repurchase of mortgage, which relates to both consumer credit and mortgage.
Note: sometimes the total cost of the loan is higher
A credit repurchase transaction certainly allows the borrower to reduce the amount of his monthly payments, but on the other hand, the total cost of his credit may be increased. It all depends on the APR offered by the bank and the repayment duration (the longer this duration, the more the APR increases).
Now that the concept of credit consolidation seems clearer to you, let’s see how to benefit from a buyout of low-rate credit.
The low-rate credit buyout mini-guide
To be really interesting, a consumer or real estate loan consolidation operation will result in a reduction in the borrowing rate. By that, mean a rate lower than the average rate for old loans. If as we have seen, the repayment period has its role to play, the borrower can activate other levers to convince the bank to offer him a better offer. Here are some ways to follow for a buyout of low rate credit …
As with conventional credit, the bank will first assess the share of risk. If she were to buy back the borrower’s loans, will she have collateral? If this is not the case, this does not mean that the borrower will be systematically refused credit. On the other hand, to “compensate” for the risk taken (in the event of a life accident, loss of employment, etc.), the bank will apply a higher rate. Thus, it is better to be able to attach guarantees to your credit repurchase file. These may be of a different nature. There are for example:
- The mortgage guarantee: it applies if the borrower owns real estate or accesses property via his loan repurchase;
- The surety: a person close to the borrower stands surety, that is to say, they will reimburse the borrower’s monthly payments if the latter can no longer cope with it;
- Life insurance: the capital is frozen in part or in full during the entire repayment period.
Good to know: the advantages of life insurance for the borrower
In addition to being a good guarantee in the eyes of the bank, life insurance saves the borrower from having to pay mortgage costs, but also from taking out borrower insurance. Provided, of course, that the capital on the insurance policy is sufficient.
The more collateral the borrower has, the more the bank will trust. Why? Because it will consider the total repayment at the end of the repurchase of credit no longer as a possibility, but as a quasi-certainty. It is the assurance, for the borrower, of obtaining a buy-back of credit at a low rate since he will have the material to negotiate the APR.
Simulation tools and comparators
Each bank charges different interest rates. Simulation tools and online comparators are perfect for getting an idea of the credit market. By increasing the number of attempts made with different financing organizations, the borrower increases his chances of finding a buyout of low-interest credit.
Credit buy-back and low rates go hand in hand! Pioneers in the country in collaborative lending, our rates are very attractive and even unbeatable up to $ 3,000 in loans. There are also no prepayment charges, regardless of the amount of your credit. Visit our simulation tool to find out how much it would cost you in total to redeem your credits with us! Are you interested in our offer?