The redemption of credits is a banking transaction that reduces the monthly repayment charge related to different credits subscribed. During the financial package, the repayment term of the new single loan implemented will increase. Other parameters characterize the redemption of credits, such as the possibility of making a request for additional cash or to collect consumer credit and a mortgage loan. Depending on the situation and the type of redemption made, it will be necessary to subscribe to a borrower insurance. It is very useful to protect yourself from the risks of non-payment of monthly payments.
The definition of the purchase of credits
The repurchase of credits or grouping of loans, or even restructuring of debts makes it possible to regroup all the debts of a household. Debt means all outstanding loans, but also tax or personal debts, unpaid debts and bank overdrafts. The benefits of this operation are numerous, starting with the serenity in the personal finances that it can install. Indeed, having only one monthly payment credit to repay is more comfortable, just like having only one bank interlocutor. A single fixed-date debit on his bank account allows him to better manage his finances and his remaining monthly living.
As with any conventional loan, the redemption of credits is subject to a pre-defined interest rate and repayment period. During the financial package, the rate can be adjusted downwards, in line with the current low interest rate policy. As for the duration, it can be rehabilitated also even if it will tend to increase to lower the amount of the monthly payment. The main objective is to readjust all the conditions of the new credit so that they correspond to the borrower’s situation and repayment capacity. Its debt ratio can thus fall, while it will be able to recover its capacity for savings and even investment.
Finally, it should be noted that there are two categories of credit redemption. The first category is the purchase of consumer loans, which includes personal loans, earmarked credits (car, works, etc.) and revolving loans. The second category is the repurchase of mortgage credit, also called mortgage repurchase. It may include a home loan only, but also one or more consumer credit. The advantage is that they can benefit from the low rate related to real estate. The condition for being part of this redemption category is that the real estate share is greater than 60% of the total amount borrowed. To provide a guarantee in case of non-payment of monthly installments, the borrower puts his real estate in mortgage. Since the future is not predictable and a life accident can occur at any time, a creditor insurance can be quite useful.
The interest of a borrower insurance
The borrower insurance is used to protect the lender on one side to make sure that the monthly payments will be refunded whatever happens, but also the borrower. No one can predict what the future holds for him, it is more prudent to subscribe for any credit to a borrower insurance. Indeed, this can be very useful in case of a hard blow of life like a death, a divorce, an accident, a disability, a job loss. These situations can lead to financial difficulty and therefore repayment of credit. That’s why the insurance will be there to take over and ensure the payment of deadlines.
Repayment of the monthly payments is thus guaranteed and the borrower is safe from the problems and their sometimes disastrous consequences. The borrower insurance covers the repayment of your loan either by staggering the monthly payments or by repaying all the outstanding capital. For information, borrower insurance in the context of a purchase of credits offers serious guarantees because it covers the loss of employment, death, disability and temporary incapacity for work.
Depending on the type of transaction, the financial institution granting the loan requires borrower insurance. Although no current law requires a borrower to purchase such insurance, it is a condition of the lending institution to provide the loan. This means that concretely, no insurance borrower, no credit. This is the case for everything related to real estate acquisition and investment in real estate. As for a conventional home loan, the repurchase of mortgage, especially if it is a mortgage purchase, systematically requires the subscription to a borrower insurance. In the end, this is really in the interest of the borrower to protect himself in case of unforeseen financial difficulties. Of course, if the lender requires it on his side, it is that he also wants to be secure to the maximum. In the case of a buyback of consumer credit, the borrower insurance is optional. The lending institutions will offer it automatically, but it remains an option to which the borrower is not obliged to subscribe.
Find the best borrower insurance
It is important to know that it is not mandatory at all to accept the insurance proposal of the bank or the financial institution that grants the redemption of credits. If the borrower finds a similar offer from another insurance company, or even a delegation, he is not obliged to sign the offer since the Lagarde law of 2010 authorizes to opt for the borrower insurance of his choice. In addition, the Hamon Act of 2014 allows any borrower who has signed an offer of loan insurance in the context of a loan or a purchase of credits, to terminate it and to change the contract until the first anniversary of the insurance contract signed in advance. In short, this law really allows you to choose your insurance without being tied to the lender. It allows by deduction to make serious savings.
The borrower can use a credit insurance broker. It has the opportunity to compare offers more easily since it works with the main financial institutions. The advantage is that the borrower can save time, but also money because he will find the most suitable offer. He often offers tailor-made support and accompanies his client from the beginning to the end of the loan buyback process.
Another important point to raise is that during a repurchase operation of mortgage credit, the insurance borrower of the initial credit ends. This is automatic since the credits are settled to be grouped in a new credit. When the borrower insurance has been subscribed in another institution than the lender, it must be informed of the change and new credit conditions. He will be able to adapt the guarantee level to the new contract. If the amount borrowed under the repurchase of credits is large and no insurance has been subscribed so far, the new lender can request a subscription in a mandatory manner to reduce the risk of non-repayment by the borrower.
The establishment of a new borrower insurance is precisely the ideal time to review the cost, the amount of the contributions and the conditions thereof. Look for a more attractive rate and more advantageous guarantees are all reasons to play the competition. The purpose of the redemption of credits is to lower its monthly payments.