Credit restructuring, refinancing or credit consolidation are other names for this operation aimed at reducing the total monthly payment.
The Consumer Code (Art. R314-19) precisely defines the consolidation of credits as being a “credit transaction [ayant] for the purpose of reimbursing at least two previous debts including a current credit (…)”.
Here, the purpose of the operation is to concentrate all or part of its credits in one. Let’s see how it works, depending on the nature of the credit resulting from the consolidation.
The purchase of real estate loans
In this caseits total amount cannot exceed 75,000 euros, taking into consideration total loans to be consolidated and potential additional mortgage.
This amount includes:
- costs,
- interests,
- commissions et taxes,
- early repayment indemnities,
- possible additional costs.
Can be added, in case the institution offering the purchase of credits intends to register a security on the real estate in the first place, the costs of discharge of mortgage or lien of money lender.
consumer loans
The operation of purchase of consumer credits is subject to the provisions relating to consumer credit, unless it is secured by a mortgage or other comparable security on real estate for residential use, in which case it will be subject to the provisions relating to mortgages.
The terms of a loan buy-back
Be careful, grouping credits can cause an increase in the overall cost. The institution allowing you to do so must ensure that the proposed solution is compatible with your current debt ratio.
He may suggest as follows:
- a lower monthly payment with a longer repayment period;
- a lower rate if the market is in tune;
- an identical or larger monthly payment in order to reduce the repayment period.
In any case, and since 2012, the institution is required to indicate whether the consolidation will correspond to an extension of the repayment period and/or an increase in the total cost of credit.
And he will provide a document listing the elements of the current loans and debts to be consolidated.
