To protect against the possibility of a repayment of a monthly payment in the context of a loan consolidation, creditors such as credit institutions or traditional banks require guarantees from their customers before validating a request for redemption. These can take several forms: solicit a third party to act as guarantor in the event of default and repay the credit in place of the borrower or call on a bonding agency.
Define the redemption of credits
Individuals who accumulate too many credits and whose budget is increased by the repayment of all these monthly payments, can turn to the redemption of credits. This is a banking operation that involves the repurchase by a lending institution of all the loans contracted from various organizations. Therefore, the borrower subscribes to a new loan and reimburses a single monthly payment. The main advantages lie in the fact that it is possible to significantly reduce the amount of monthly payments and to negotiate a favorable rate. In return, the repayment term will be extended and the total cost of credit increased. This operation concerns different types of credits such as consumer loans (car loans, work loans, personal loans) or real estate loans. In addition, it is also conceivable to include in the assembly various debts such as bank overdrafts.
Make a call to a third person as guarantor
A borrower who wishes to obtain a loan consolidation can guarantee it in support of a third party : a guarantor. It can be a family member or just a loved one. The latter then guarantees in the event of insolvency of the signatory of the repurchase agreement. In concrete terms, if the borrower is unable to repay a credit date, the lending institution can then claim the amount due from the person who has declared himself a guarantor. To guarantee and the redemption request is validated, it will be imperative that the guarantor has sufficient income to repay the monthly installments in question. Banks and lenders will pay the same attention to the guarantor’s file as to the borrower’s.
At the time of the validation of the loan consolidation contract, the guarantor must sign a document authorizing the creditor to collect the monthly payment due in the event of default by the borrower. As for any subscriber of a credit and in application of the Consumer Code, the signatory of the surety has a right of retraction of fourteen days.
The stronger the profile of the bondholder, the more likely the borrower will make their credit buyback project a reality. Having a guarantor is therefore a major advantage to secure both the bank and the borrower.
Use the services of a surety agency
Alternatively, seek the services of a bonding institution. For a fee, the organization in question guarantees when a customer is unable to repay a maturity related to a redemption of credits. In most cases, we will talk about a bank guarantee.
Concretely, when this option is chosen, a financial institution partner of the bank in which the purchase of credits has been subscribed acts as guarantor. The total amount of this bond varies depending on the borrower’s profile, the number of loans involved in the consolidation or the fixed repayment period.
Compensation can take many forms:
- a guarantee fee that will correspond to a predefined percentage of the total remaining capital of the new credit
- a flat-rate contribution with regular maturity
This guarantee is not granted to all clients or by all lending institutions, whether they are traditional banks or organizations specializing in the redemption of loans. It is very advantageous because it will allow a borrower who finds himself in a delicate financial situation not to accumulate the defaults of payment and thus to gradually recover a budgetary stability. A bank guarantee associated with a credit redemption operation is therefore wise because it will protect the borrower against over-indebtedness.
Guaranteed redemption for real estate loans
When it comes to a loan redemption that concerns a home loan, it is possible to opt for a surrendered credits. Again it is a third institution that vouches. This is a real alternative to a group of mortgages. Designed exclusively for homeowners or prospective first-time homebuyers, this option provides many benefits, the most important of which is that the buyback can be up to 80% of the value of the property owned by the borrower. In addition, the repayment term of the new credit under this framework can be up to 25 years. In most cases, the total cost of this bond is 2% to 3% of the amount borrowed.
The formalities for this type of bond are largely simplified and less expensive than when it comes to a mortgage purchase:
- no notary fees because there is no need for any notarized act
- no fee if the mortgage is closed before the end of the pre-established repayment period
- the release of funds and the realization of the redemption request are generally much faster
- the deposit is put in place directly after the signature of the contract and allows to be protected from the first monthly payment
This type of guarantee is accessible for a wide range of borrowers. It is not for employees but also for seniors up to 84 years and 6 months. The only condition is of course that the applicant for the grouping is the owner of a property.
Fit a solid file
Whichever option you choose, it is essential to build a very solid file to ensure that you get an offer to buy back credits. In the first place, the institutions will obviously study the elements relating to the profile of the applicant of the grouping such as:
- the household’s monthly income via mandatory documents such as salary slips for the last few months, the latest tax notices
- bank statements for the last three months
- the professional situation: the type of contract (permanent, fixed-term, temporary, etc.)
- available savings via booklet statements
- monthly charges by providing the latest rent receipts
- household wealth
- the type of guarantee envisaged
- the remaining capital to be repaid and the number of credits concerned
All these documents will be studied carefully by the experts in charge of validating a request for redemption. Thus the same attention will be paid if one opts to guarantee its redemption by a third person.
With respect to bonded redemption applications, it will be all the more important to build a reassuring record. Indeed, it is a particular and very advantageous arrangement that is not granted to all borrowers. Only people with a solid record can benefit from this type of bond.
Subscribing to a guarantee that allows maximum security for both the borrower and the creditor is a guarantee of success of a credit buyback operation.