An individual who has taken out several loans may have recourse to a specific financial transaction: the restructuring of loans, also called loan repurchase, grouping of loans or even debt restructuring. Let’s see what exactly it is and what it is for.
Credit restructuring in a nutshell
We talk about debt consolidation when a bank buys various loans taken out by a borrower. During this operation, the credits being reimbursed are grouped into one, at a single rate. At the same time, the repayment period is extended, which leads to a reduction in the amount of the monthly payments.
A credit restructuring will involve at least two credits and will be of a different type depending on the nature of the credits bought back. We distinguish:
- the repurchase of consumer credit, which includes only consumer credit (personal loan, revolving credit, restricted credit, bank overdraft, etc.);
- the repurchase of mortgage, which includes at least a consumer loan and a mortgage.
Note: there is another type of debt consolidation
It is the repurchase of mortgage credit. The latter is similar to the repurchase of a mortgage, with the difference that here, real estate is brought as collateral.
Aside from consumer credit, other debts can be included in a loan pool. This is for example the case of family debts and tax arrears.
What is the purpose of debt restructuring?
A loan restructuring operation aims to recover a certain financial serenity. As the amount of monthly payments is reduced, the debt ratio of the borrower decreases. However, who says decrease in the debt ratio, says more purchasing power. The borrower can thus better cope with their daily needs or the unexpected, or even consider a new project. If necessary, a new loan will be integrated into the debt restructuring.
A repurchase of credit is an excellent solution in the event of deleveraging, that is to say when the financial situation of the borrower presents a certain instability. This can happen in particular if the loans taken out have excessive rates, such as revolving credit.
Who can offer me a group of loans?
A grouping of loans can be established by a traditional bank, but also by a credit institution specialized in this form of financing operation. If a bank offers mostly any type of restructuring of loans, it is not necessarily the case for all credit institutions. These can indeed make or credit redemption consumer or the mortgage redemption and / or mortgage their specialty. Still other credit institutions only offer this financial arrangement to tenant borrowers, or on the contrary to owner borrowers. The task is therefore difficult, especially since there are a large number of players on the market. It is therefore wise to turn to online credit buy simulators and comparators to save time and find the most advantageous offer in relation to your situation.
Another interesting option, to be raised in parallel to facilitate its approach: the use of a broker. This intermediary in banking and payment services knows all the tricks of the sector. It provides the applicant with expertise on his financial situation so as to establish a precise refinancing plan. The broker then directs his client to the offer most suited to his situation. As the broker works in collaboration with banks and credit institutions, he is able to negotiate the terms of the loan consolidation, which is a guarantee of savings!
What is the maximum duration of a consumer credit buy-back?
Compared to the repurchase of mortgage, whose duration can go up to 35 years, a repurchase of consumer credit has a more limited duration. Debt restructuring of this type can be spread over:
- 12 years if the borrower is a tenant;
- 15 years if the borrower is the owner.
Of course, this repayment period is quite relative. To define it, the bank or the credit institution will observe several data such as the amount of redemption, the personal and financial situation of the borrower, but also his age. Each organization has its own policy on the issue. But in general, for a repurchase of consumer credit, the repayment can be made up to the age of 75 or 85 years depending on whether the borrower is tenant or owner.