Understand the operating principle of repurchase and credit consolidation

Credit repurchase is a technique that tends to be increasingly used in France. This is due to the fact that many individuals and families opt for this loan solution in order to solve a financial problem or simply to finance a one-off project such as studies or the rehabilitation of a house, etc. Do you wish to make a loan repurchase? Then this guide on how loan repurchase works may be of use to you.

Understanding what a loan repurchase is

A credit repurchases or credit consolidation is a financial solution that consists of substituting one credit or combining several others that are outstanding into one credit. In addition, also known as a credit restructuring or consolidation, it may also involve the consolidation of different deficits that may be of a different nature: consumer credit, personal credit, works loan, real estate credit, revolving credit, family debt or tax debts, or loans taken out with different banks. In fact, some people mistakenly think that this operation is exclusive to situations of excessive indebtedness, whereas it may also concern the financing of a project that requires a fairly large sum of money, because in a credit consolidation it is possible to include a new loan under certain conditions. In fact, any eligible person with several outstanding loans or wishing to readjust the management of his income can claim a credit repurchase in the same way as a person who would like to finance a new project. There are two types of credit repurchase, such as consumer credit repurchase and real estate credit repurchase.

Advantage of credit consolidation

Credit pooling offers a large number of advantages against minimal disadvantages to lenders.  Firstly, it reduces debt and insurance rates, but also limits the risk of over-indebtedness. Secondly, by grouping all your existing loans into a single batch, you will benefit from a considerably reduced overall monthly payment amount adapted to your repayment capacity. In addition, by avoiding the payment of several installments at the same time, you will only have to worry about a single monthly payment, a single fixed APR, a fixed term, a single contact person and a single bank. Thus, carrying out a credit consolidation allows you to better control your budget, to reorganize the management of your finances, while having the possibility to include the financing of new projects. However, the full term will be extended, which would increase the overall amount of financing.

Making a credit buyback: the conditions for validation

Credit repurchases are often made with a new credit institution that will settle all previous deficits. However, as a lending institution, in order to validate the transaction, the latter will carry out a prior study of the possible risks of insolvency and of certain supporting documents of the applicant. First of all, in the case of a consumer credit consolidation or a real estate loan buy-back, the new banking institution will ensure that the borrower's real capacity to repay will be sufficient and will guarantee his solvency. The bank will then analyse the stability of the borrower's professional situation. Thus, the borrower must have a regular income, constant account management and the total cost of monthly repayments must not exceed one third of his income. In addition, the applicant must also be able to provide movable or immovable guarantees for capital payments. With regard to formalities, a copy of the marriage contract or the divorce decree will be required, if applicable. Finally, if the applicant is registered on the Central Cheque Register for payment incidents (FCC) or if he or she is facing over-indebtedness, the file will be immediately rejected.

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