Close to their lowest historical records, credit rates remain at very attractive levels at the start of 2019. These borrowing conditions favor the repurchase of credits and many French households benefited from them in 2018. Allowing you to reduce your monthly payments, invest in new projects or simplify the management of your budget, a loan buy-back offers multiple advantages, subject to achieving it in the rules of the art. Here is a quick reminder of the best practices to follow to optimize your credit buy-back in 2019.
Borrowing rates still very favorable for buying back loans
Borrowing rates have remained at very low levels throughout the past year. At the start of 2019, it is possible to borrow at average rates from 0.75% to 1.15%, over 15 years. For a 20-year loan, the median rates are 1.25% to 1.55% (compared to 1.30% to 1.65% last year). Suffice to say that rates have kept all their potential for attractiveness to make a credit buyback operation profitable.
These very favorable conditions are bound to continue. Specialists are considering rate stability at least until the end of the first half of 2019.
Recall that the repurchase of credits consists in regrouping all or part of your old loans, credits in progress (real estate loans, consumer loans, revolving credit, debts) and other debts (fiscal, family or rental debts) and to replace them by a single consolidation loan on more advantageous terms.
The more attractive the rate of your new loan, the more profitable your repurchase of credits. However, the rate is not the only criterion to evaluate in order to judge the advisability of a loan repurchase.
Evaluate the different criteria linked to your loan buy-back.
It’s not just the rate of the new credit to check. It will be advisable to compare the total amount to be paid in each situation: within the framework of your existing credits the total of the monthly payments remaining due, as well as the total cost of the new credit which will replace your grouped credits.
One of the first criteria to study will be the Global Effective Rate (TEG) of the new loan which will replace your old grouped loans. Then assess its nominal rate and the various costs associated with your loan repurchase. The savings made on your new borrower insurance are also part of the points to study.
The Total Effective Rate (TEG) includes all the fees that you will have to pay in connection with the subscription of a credit repurchase agreement. This amount includes administration fees, insurance costs and interest on the consolidation loan replacing your old credits. The nominal rate determines the interest linked to your monthly payments. This amount to be reimbursed must not exceed one third of your income so that you can keep a balanced budget (less than 33% of your income).
In general, the rate difference between the rate currently outstanding and the rate of the new loan must be at least 0.7 points for this to be advantageous. It is also recommended not to carry out a loan repurchase with a mortgage that has exceeded the first 7 years of its repayment. Beyond this period, the total difference in monthly payments is no longer sufficient to cover the penalties and associated costs (in most cases, but there are exceptions).
You can also adjust the duration of your new loan. This duration also determines the overall cost of your loan repurchase. Of course, a longer period allows you to reduce your monthly payments, but also comes with a higher overall cost.
Finally, do not forget to carefully consider all the costs associated with your buy-back transaction. Redemption fees, handling fees, but also prepayment penalties. Indeed, vis-à-vis the first lending institutions, your credit repurchase is equivalent to a prepayment. The prepayment penalties requested by the lender will be due in all cases.
Optimizing the cost of borrower insurance
Your credit repurchase terminates your previous loan contracts, as well as the borrower insurance in progress on these loans. As a result, you have the opportunity to save on the new borrower insurance that you will need to purchase to cover your new consolidation loan.
Since the Lagarde law (2010) and the Hamon law (2014), you can take out insurance other than that offered by the bank which carries out your loan buy-back. This is called insurance delegation and very often it allows you to halve your insurance contributions on average.
In addition, since January 12, 2018, the Bourquin amendment gives you the opportunity to change insurance once a year. You can therefore adjust your insurance each year according to the evolution of your situation.
Again, choosing your new borrower insurance can be a lot easier by taking advantage of the advice of a credit broker specialist.
Save time and money with a specialist broker.
Intermediary in Banking Operations (IOB), the broker in repurchase of credits will help you to compare the offers and to choose the most adapted to your situation. It has a network of partner banks and credit organizations and it can therefore be granted buyout offers more advantageous than those you would have obtained alone.
Not only will it save you time by comparing the offers for you, but it will also facilitate the granting of your credit buy-back by helping you to present a dossier which highlights the positive points of your request.
Build a buyout file, compare the offers of organizations, negotiate the best conditions all this comes with sometimes tedious steps. Thanks to the loan repurchase broker, you benefit from expert support and, ultimately, a much faster delay in granting your credit repurchase.
How much does it cost ? Murcef law specifies that no payment or payment can be required from the borrower before obtaining his credit. In other words, you should only pay your broker for loan redemption when you sign the final loan offer. In addition, this remuneration will be financed by your new single credit. In addition to making you money on the conditions of your credit redemption, your broker will therefore not cost you any fees when launching the transaction.