Over the years, we sometimes accumulate loans to finance life projects or just solve financial problems. When a change of situation occurs, it is the balance of a home that is impacted. After trying to revise your budget, prioritize your expenses or other solution, you can apply to a bank to renegotiate your credits or opt for the purchase of credits. fullspectrumottawa.com for further clarification
The redemption of credit in a few words …
The repurchase of credit consists in grouping in one single loan all of its debts by reducing the amount of the monthly payments, while lengthening the duration of the repayment. A repurchase of credit is in other words, the transformation of several credits subscribed on a short term into a single loan repaid in the long term with a more interesting interest rate. The repurchase of credit appears as an advantageous solution for the borrower who will be able to see his monthly payments decrease until 60%. He will therefore have only one monthly payment that he will reimburse to a single organization which facilitates the monitoring of the budget, secures and simplifies these banking procedures without changing his habits. The borrower will see this as an opportunity to increase savings and recreate some cash to finance new projects.
For or against, should we really be tempted by the repurchase of credit?
First of all, although this solution is aimed at all people wishing to consolidate their debts into one to facilitate their budget management, it is also aimed especially for people wishing to alleviate a financial situation that has become difficult to manage. The people most targeted by this type of contract are people at the limit of over-indebtedness or over-indebtedness. However, it is important to note that in order to benefit from a credit redemption, the debt distress procedure must not have been initiated with the Bank of Daisy. The term over-indebtedness is used when a person allocates more than 33% of his total monthly income to the repayments of his debts, credits, loans contracted from different financing organizations. If it is possible to carry out a debt overhang with the Bank of Daisy to cancel part or all of its debt, it may also have recourse to the repurchase of credit. This solution will allow him to move from this situation of overindebtedness to a so-called “normal” situation. In addition, it will enable it to avoid being registered in the National Register of Personal Credit Reimbursement Incidents (FICP), which leads to the almost systematic refusal of a request for bank loans. Indeed, a situation of over-indebtedness may be temporary, so it is preferable in this case to resort to a repurchase of credit. Once the situation is normal again, you can then consider using a credit again to finance new life projects.
A point not to overlook when redeeming credit is the interest rate at which you will redeem your credits. It should be noted that the rate to be taken into account is the APRC and not just the interest rate itself. The APR is the annual percentage rate of charge. This rate includes, on the one hand, the own interests of the credit, but also on the other hand, the expenses of files, the insurance contributions (when this one is obligatory), the commissions and remunerations of any kind. In general, it is always more interesting to have a fixed interest rate rather than a variable rate. Indeed, beware of offers with low interest rates in the first months that increase 6 months later, or offers with adjustable APRs. Even if the monthly payment will remain the same, the net repayment portion of the capital will be reduced in favor of the interest portion. This may therefore lead to an increase in the loan repayment period. Indeed, it is impossible to evaluate the change in interest rates that can be revised over the long term. When you buy a loan, you are already in a repayment procedure over a long period, do not take the risk of increasing this period exponentially. You could lose a lot of money … while you were looking to get out of a debt situation.
Make the competition work
Ask for the offers with the total costs, and therefore with the insurance included, in order to compare and know the exact amounts that will cost you. In general, financial institutions advertise offers without insurance. The purchase of credits will therefore cost you more than you expected if you do not know the additional costs. In addition, to open up to the competition, when looking for the best offers, it is possible to call on a broker who is committed to finding the best deal according to your needs. Nevertheless, be careful: before applying for a broker, make sure that it is well-accredited, that the companies are mandated to be credit organizations (generally, beware of offers with organizations not well known on the internet) . In addition, the brokerage fees will cost you money … But remember that you are looking to save money, so it is certainly better for you to take a little time to analyze the offers by yourself. The request for an offer to buy a credit to a bank remains a free act. Moreover, there are a multitude of websites allowing you to make simulations, to find consumer opinions on various credit redemptions, different organizations.
Inform yourself before signing anything.
Finally, if on paper reduce your monthly payments may seem like a bargain, this is not always an economical solution. Indeed, if in the short and medium term, the repayment portion of your debts will be less important on your budget, in the long term, for the same capital borrowed, you will repay longer and therefore pay more interest. Extending your repayment period by redeeming credits, contracting a contract with lower monthly payments therefore increases the initial cost of your loans.
This relief is also very dangerous.
You will feel that your budget is more important, you will consider making new projects and therefore you may be tempted by the subscription to a new credit type consumer credit … What will you start in the circle? infernal and will gradually lead you to the ultimate situation of over-indebtedness
The same is true for the total amount you will borrow when you buy back credit. When you want to redeem credit, find out how much you really need. Generally, the financing organization will try to increase the amount you will borrow by proposing a new cash loan. By doing this, he tries to attract you by offering you a fund of money allowing you to carry out a project, or simply to lighten your daily life. In fact, it will have increased the capital to be repaid and therefore your repayment period but especially the interest associated with it. So you are going against what you were looking for to make a credit redemption.
Finally, in many cases, early redemption clauses are taken into account in the terms and conditions of the credit redemption. Before signing the agreement, it is important to read it and therefore refuse to sign the contract if this is the case. Indeed, it is more interesting for you to find an organization allowing early repayment, this leaves a certain freedom to repay at your leisure and not to be obliged to stay for 4,10,15 or 20 years under contract with this financier.