Credit consolidation: how does it work?

The pooling of credits can allow you to clean up your finances. Discovered in 12 true / false.

I can ask to restructure my loans if I am no longer able to pay due dates.

REAL. Although this is not the only reason to resort to this type of operation. It is also very often used to finance a new project (work or even the purchase of a secondary residence or rent, etc.) as well as by seniors aged 60 and over. But, of course, grouping of loans is interesting in case of financial difficulties, due to both a drop in revenues and an excessive number of loans. ” Ideally, as soon as the first difficulties appear, take steps to rebalance your finances as soon as possible.”Recommends Cécile Roquelaure, spokesperson for the broker Empruntis.

Clearly, don’t wait for your situation to get worse. React as soon as you use your authorized overdraft more frequently, for example. Because, in the event of a critical situation, the bank will very often refuse your loan repurchase request and refer you to an association to create an over-indebtedness practice.

I have to consolidate all my credits, not just the consumer ones.

IMPOSTOR. If you have at least two current consumer loans (revolving credit, car, work, etc.), you can request their consolidation. It doesn’t matter if you are the owner otherwise o tenant, details Joël Cronimus, of RefiConcept, broker specialized in the purchase of credits. In order for the operation to make sense, a minimum residual capital of € 10,000 is still desirable.“, He specifies. What if I also have a home loan? ” You don’t have to put it all together, explains Laurence Brignon, loan consolidation specialist at BNP Paribas Personal Finance. This will certainly be advised at times to clean up the borrower’s budget, but not advised if he is on a very low rate loan, a zero rate loan, or if the term or residual capital is low.

The applicable rate is the same regardless of whether the grouped loans are consumer or real estate.

IMPOSTOR. If the share of real estate loans in the grouping is equal to or greater than 60%,decoding Cécile Roquelaure, the rates applied will be based on those of the properties, ie between 2% and 2.15% over 25 years. Otherwise (mortgage less than 60%), the consumer credit rates will apply. Their they are higher: about 3% with mortgage and 4% without guarantee.

Consolidating multiple loans allows you to repay less each month.

REAL “This is the primary objective of the operation: to find some peace of mind with your monthly budget”, Analyzes Cécile Roquelaure. This monthly payment cut can increase your cash flow to get you started on a firmer foundation. A phenomenon made possible by the lengthening of the duration of the loan.

The rate of a consolidation is higher than that of a conventional loan.

REAL. The rate of a restructuring that includes more than 60% of mortgage is higher than that of a conventional mortgage: they count from 2% to 2.15% in 25 years for the first against 1.50% on average for the second. But if you also buy consumer loans at 5 or 6% and a revolving credit at 20%, your new rate will be more advantageous. ” To reduce debt, remembers Laurence Brignon, the term of the loan must be extended, which increases the total cost.

Taking out a mortgage is mandatory in this operation.

IMPOSTOR. The assumption of guarantees for the new financing is only necessary when the global envelope is important. Or, more often, in acquisitions where the mortgage represents 60% or more”, Emphasizes Cécile Roquelaure. If you only buy consumer loans, debts or overdrafts, no collateral is required, unless your situation requires it (very large amount borrowed, financial fragility).

A point of view shared by Laurence Brignon, who reveals that it is possible, depending on the client’s profile, to finance mortgage-free restructuring of up to 250,000 euros. “The assumption of guarantees, on the other hand, affects the maximum duration of the purchase of consumer loans (less than 60% of properties)says Joel Cronimus. Without taking collateral, it will be limited to 15 years for an owner and 12 years for a tenant, while it can go up to 25 years with a mortgage. “

I can pay off personal debts through this system.

REAL. It authorizes the integration of all types of credits, whether they are bank overdrafts, traditional credits or debts (alimony, taxes, bailiffs, etc.). ” On the other hand, professional debts are not affected by this system.”Says Laurence Brignon.

To restructure my loans, I have to change banks.

IMPOSTOR. Loan consolidation is practiced in specialized institutions that do not offer traditional banking products. So you don’t have to change your habits. You can keep your bank for your daily transactions. A simple transfer from your current account reimburses the new credit every month.

I cannot use this device if I am retired.

IMPOSTOR. Unlike many conventional financing solutions, credit consolidation is possible for seniors, even for long periods, reveals Cécile Roquelaure. It is also a solution for gaining budgetary flexibility with the transition to retirement“. Joël Cronimus’ explanations: ” In a conventional loan, the maximum age at maturity of the loan is generally 75 years, while with a loan consolidation it can be up to 85 years, or even 95 years with guarantees in some establishments.

Labor costs can be financed in this way.

REAL. The purpose of a credit grouping can only be this. For example, with a debt ratio that is too fair, it allows you to finance the work while maintaining a monthly payment equal to the current one, or even lower.

The expected costs can be very high.

REAL. You must include all ancillary costs in the calculations: tuition fees deducted by the institution (1% of the loan amount), mortgage fees (1.50 to 1.70%), brokerage fees (up to 5%, depending on the complexity of the transaction), penalties for early repayment of repurchased loans … ” Important information to ask your broker, advises Joël Cronimus. They will allow you to check if the operation is interesting.

With this formula I can extend the duration of my loans.

REAL. The credit repurchase duration applies to all your debts. If you have a car loan over 3 years, a business loan over 7 years and a mortgage over 15 years, and your consolidation is expected to take 20 years, the repayment will be spread over this period for the whole. Depending on the type of repurchased loans and the share of the property, the duration of the new loan can rise up to 12, even 15 years for consumer loans, and up to 25 years with a mortgage or over 60% home loan. Using this type of operation allows you to increase the repayment age at the end of the loan from 10 to 20 years, depending on the institution.

The annual percentage charge rate (APR)

The APR of a group of loans is limited based on the usury rate: 2.40% for a mortgage over 20 years and more and 4.93% for a consumer loan over € 6,000. Note that the usury rate takes into account, in addition to the credit rate, all ancillary costs (files, brokerage, mortgage, etc.), excluding the borrower’s insurance, which is optional here.

Number to know: the maximum duration of a consumer loan consolidation (with less than 60% of real estate) is 15 years when the objective is to finance the purchase of a vehicle with a new loan.

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