Credit redemption may be necessary when your financial health deteriorates, but also when interest rates fall. Learn more
Credit redemption may be required when your financial health deteriorates, but also when the decline in interest rates allows additional gains on the cost of credit. In either case, you must be convincing to your creditor to obtain new and better credit terms. To do this, you need to know the conditions for a better renegotiation and follow some essential steps to achieve your goal.
Conditions conducive to renegotiation
The first of the conditions is the rate-related one. At this moment, the credits are still at low interest rates. For real estate for example, the October 2016 figure of the Bank of France reveals that the average non-insurance rates over the short, medium and long term is around 1.62%. For borrowers who negotiated a debt consolidation loan in difficult conditions related to the 2008 crisis, the time is right to buy back its loan to the condition of not exceeding half of the term of the loan where the bulk of repayments is often already realized.
However, what matters is having a gap of one point between the initial interest rate and the current rate. In this case, it is easier to get a renegotiation from your bank. In addition, as part of this process, you are exempt from early redemption fees and fees associated with the new conditions. But, it remains to you to pay the expenses of files of 500 to 800 euros on average.
The purpose of the renegotiation of the repurchase of credit is to regroup in case, several loans in a single, to obtain a more favorable rate and to extend the duration of repayment of the loan. Sometimes its goals are met in part or in full.
Even if the process of renegotiating your credit redemption is interesting for your finances, the agreement of your creditor is not obvious. We must therefore play the competition if necessary. In case of over-indebtedness, you should contact the independent associations to avoid additional costs which ultimately render the operation uninteresting. It is recommended not to skim simulations and calculations before any commitment.
The steps to follow:
- find out about the offers (rates, duration, conditions …) in order to have some comparisons and to make a selection among the lenders
- go to your bank first to renegotiate the repurchase of credit. This avoids the complications of the steps to follow, the documents to provide and any financial penalties for bank change. Whether with your regular creditor or another financial institution, you are offered new loan terms (maturity, rate, duration, monthly payment). The proposed credit agreement must also include the entire schedule, the overall effective rate and the overall cost of the credit.
- compare the proposals and evaluate the actual cost of the new loan in relation to your repayment capacity and your income
- go around all the possibilities according to your family and personal situation (loan helped, helpers …) and think to provide a personal contribution which can be a small loan at zero rate, a mortgage loan etc. However, avoid going beyond your possibilities
- negotiate at best yourself or use a broker to find an agreement with a suitable lender. Apart from the rate and duration of the loan, the level of insurance premiums, fees and prepayment penalties may be reduced or canceled. You can also replace the insurance provided by the bank which is usually more expensive.
Today, many offers allow you to renegotiate a purchase of consumer credit or real estate online. Only, all sites specialized in this area are not reliable. Be sure to check the legal and the Siret number of the provider to avoid any surprises. Very attractive offers with very easy file conditions or even fictitious expense claims are all warning elements to take into account.