You have decided to combine your credits, and you end up with a buyout proposal in your hands? What should you watch out for before committing? Discover our tips in five points.
1. Do not confuse interest rate and monthly repayment
When a loan is bought, the debt is rescheduled with a new term and a new interest rate. For the organization offering the buyout, it is very easy to reduce the monthly payment during the buyout: it suffices to increase the duration of the loan. A repayment over a longer period thus means a lower monthly payment, but be careful:
- A longer repayment term implies a lower monthly payment, but does not necessarily imply a more advantageous interest rate!
- The longer the repayment period, the higher the total cost (credit interest), regardless of the interest rate!
Before committing, it is therefore advisable not to just compare the monthly premiums before and after the redemption. Remember to check the interest rate offered: is it really lower than that of your old loan whose balance you want to buy back?
2. Check the proposed reimbursement period
The longer the repayment period, the higher the total interest paid! For the same interest rate, a 36-month credit will be 50% more expensive than a 24-month credit! We advise you to always prefer, as far as possible, the shortest possible repayment period. Also consider that it is always possible to make a prepayment, and thus save on the total interest of the credit.
3. Credit card balance and leasing: who manages what?
If the repurchase of credit effectively makes it possible to settle at once all invoice linked to credit cards or a leasing, it is advisable to check who pays what. Upon redemption:
- Will the bank be responsible for paying the leasing / credit card bills for you?
- Or will this money be paid to you, and it will then be up to you to settle these outstanding invoices?
In the case of leases, it is generally always the bank which is responsible for settling the invoices in place of the client. In the case of a credit card balance due, both situations can arise. We advise you, before committing, to clarify who pays what.
4. Is it possible to obtain additional credit?
If the repurchase of credit generally consists only in regrouping several debts (credits, credit cards, leasing) in only one more advantageous credit, it is also possible to obtain an additional credit. This is not automatically offered by the bank, and it is up to you, in the event of interest or need, to indicate it during the request.
5. Costs of other services?
The cost of a loan, or a loan buy-back, consists mainly of the total interest on the loan. However, other costs can be added:
- Possible costs of insurance (usually optional). You should then ask yourself if you need this insurance and, if necessary, have it canceled. It is also possible to cancel this type of insurance at any time for the end of the current month.
- Any other costs: paper billing costs for example, application fees (very rarely requested), etc.
If you need advice on a loan buy-back offer, it is also always possible to call on a loan broker or agency who will analyze your situation and why not offer you a more advantageous alternative!