For the past few years, you probably heard of buying back credit, or even grouping credits, but these terms are vague, and not necessarily easy to understand, they are deciphered for you.
The purpose of the credit buy-back
The people potentially interested in a credit buy-back are those who have one or more loans to repay, and who are facing an excessive repayment amount. The purpose of the credit repurchase is therefore in this case, to lengthen the repayment period, in return for a reduced monthly payment. The organization buying back the loan (s) therefore proposes spreading the debt over a longer period. Many families opt for this situation when the repayment of their mortgage reaches too much and they can no longer cope.
In which case to carry out a consolidation of credits?
It is possible to combine its various credits with a specialized organization n order to reduce the number of its credits: consumer credit, mortgage, car loan, etc. Once all of its credits have been pooled, the household will then have only one monthly payment to pay. This solution also allows you to benefit from a more attractive rate since it will be unique to all household debts.
If interest rates have fallen sharply since the signing of their mortgage, it is also wise for the households concerned to study the possibility of a buyout from their bank, in order to make substantial savings, especially if the rate that they accepted is fixed for the duration of the contract. This option is of course valid for other loan contracts, such as consumer loans, which are sometimes very expensive.
The disadvantages of buying back credit
Of course, like any financial transaction, buying back credit also has disadvantages:
- the total cost of reimbursements is often much higher
- early redemption fees and redemption fees
- the binding feasibility study sometimes making access to loan repurchase difficult.
Consolidating debt with a personal loan can be a good idea if you can get a new loan with favorable terms and a lower interest rate than current debt. Whether you can qualify for a consolidation loan depends on your credit scores, income and other financial factors.