Even though the rate on a loan buyback is a key element, it is not necessarily the right indicator to know if the transaction is profitable. While it is true that financial institutions and banks play on attractive rate offers to attract customers wishing to consolidate their loans, other parameters must be taken into account. The redemption of credits is not a financial package that can earn money, but rather a way out of a situation of high debt. It is above all to find a certain comfort in his personal finances. This is why consolidating its credits leads to an extension of the repayment term of the new credit subscribed, in order to benefit from a monthly payment adapted to the situation of the borrower and of course to give him a financial serenity.
What is the rate of redemption of credits?
In a credit buy-back operation, whether in the form of consumer loans, a home loan or both, outstanding loans are collected and settled, while a new loan is put in place. square. This then benefits from new conditions, including a new interest rate, as well as a new single payment amount that will be refunded over a period also reviewed.
The rate of a repurchase of credits, is not only the rate of interest on the sum borrowed. Other expenses are to be envisaged, it is about the expenses of guarantee, the ancillary expenses and the expenses of file. These are included in the APR (annual percentage rate of charge) which will make it possible to evaluate the profitability of the purchase of credits. The activity of the financial market experiences sometimes important variations of the interest rate, that is why it is necessary to learn well to seize the best moment and to benefit from a tendency to fall if necessary. It is important to remember that to compare an offer, it is imperative to rely on the APR.
On the other hand, the best credit surrender rate also depends on the credits that are to be bought back. Here again, it is necessary to carry out a study before embarking on such an operation. The rate of the new loan subscribed in the context of the repurchase must necessarily be lower than that of the credits to be grouped together. The repayment period must also be taken into account because it has a direct impact on the rate. The shorter it is, the more interesting the rate will be, and on the other hand the longer it gets, the higher the rate goes up, while the amount of the monthly payment goes down.
Is the rate the best indicator of a successful buyout?
To this question we answer no, the interest rate is not the best indicator for estimating whether a redemption of credits is successful. Other criteria will determine the value of a good credit redemption opportunity: the cost of insurance, the fees, the amount of the monthly payment, the duration of the credit. The interest rate is certainly the element that indicates the cost of financing, so the borrower is tempted to look for the lowest possible one from the start. It is further encouraged in this way by credit agencies, banks and brokers who bait customers through attractive rate offers.
Insurance, for example, is a very important parameter. If it is very expensive, the offer will not be interesting. The fees are also to check, they can in some cases be negotiated or canceled. The monthly payment is another very important element of a successful credit surrender operation, because when it is reduced it helps to rebalance the household budget. Above all, it will be able to be adapted to the borrower’s situation and repayment capacity, taking into account all the different parameters, both income and family situation. The purpose of a loan consolidation is, first and foremost, to restore flexibility to household finances. This means that even if the repayment term increases and increases the total cost of credit, the borrower can finish his month ends peacefully but also find a savings capacity.
What should be so attentive?
To determine the feasibility of a loan consolidation project, there are some key points that need special attention, in addition to the interest rate on credit redemption. This is the rate of indebtedness that should not exceed generally 33%. This means that the household must have sufficient living space to cover the expenses and other daily expenses. The bank or lending institution will also be attentive to the total amount of credits to be bought back, it will be necessary to check if the borrower has the capacity to repay a new loan in the context of the repurchase transaction.
As already mentioned above, the monthly payment is a fundamental element, because it is she who will define the financial comfort of the household. A contract that provides the possibility to vary the monthly repayment is a benefit, because in case of unforeseen circumstances (divorce, death, disability, loss of employment, etc.) the borrower can change its amount or even postpone the monthly payment.
The terms of early repayment are also important because the borrower may at some point in his life have the opportunity to pay the credit. The benefits provided for in the contract may be negotiated. Finally, the commercial relationship with the lender is a significant asset, especially if a difficulty was to occur during repayment of credit and of course to obtain better conditions.