Here is how a credit buyback operation works.
Credit repurchase: the basis of this financing
A repurchase or consolidation of credit (the two terms indicate the same operation) is a banking operation which consists in combining several loans into one. In fact, the credits concerned are settled and the remaining sums due are carried over to a new credit contract.
This new loan offer contains the same terms as a conventional loan: rate, duration, monthly payment and optional insurance. The advantage of buying back credit is to reduce the amount of the new monthly payment by lengthening the repayment period.
Nature of the loan
Law specifies that there are two types of loan consolidation: the so-called consumer buyout and the so-called real estate buyout. In fact, it is the share of mortgage loans to be taken over which determines the nature of the new loan. If this share is greater than 60% (compared to the total sums to be taken over), then this is a buyout of mortgage, if the share is less than 60%, it is therefore a buyout of consumer loan.
The costs related to this financing
A credit consolidation is not free, the operation may incur costs when it is set up. First, the application fees. The arrangement of this type of financing is more complex than a conventional loan and requires more supporting documents. Early repayment of loans can also lead to compensation (depending on the contract), up to a maximum of 3%. The guarantee request (mortgage via the notary, bond) can also be a source of costs.
Steps to take
A borrower can call on his bank or a banking intermediary to request the consolidation of his credits. His bank will then rely on its own funds to make a proposal. If the bank does not offer these types of financing, the borrower can turn to an agent, broker. It is an organization which acts as the intermediary between the borrower and the credit institutions which exclusively finance loan repurchases. Lending companies also offer a free, no-obligation study via its online request form.