From allocated credit to revolving credit via student loan or personal loan: a consumer can perfectly restructure his consumer debts by carrying out a grouping of loans. But if a consumer credit is capped at 75,000 USD, what is the maximum amount of a consumer credit buyout?
Furthermore, what projects can such an operation finance? From the best consumer credit rates for households in financial difficulty to the possible role of mortgage recharge for homeowners, here is the information to know.
What is the maximum amount for buying back consumer loans?
The maximum amount for a consumer loan is set at 75,000 USD, while the minimum threshold is 200 USD. When a loan is more than 75,000 USD, it is no longer legally a consumer credit. In other words, the operation no longer falls within the framework of the Lagarde (2010) and Scrivener (1978) laws.
The borrower no longer benefits from this legal protection enshrined in the Consumer Code. He must therefore monitor the clauses of the contract itself, in particular the duration of repayment, the borrowing rate, the amount of the monthly payments or even the clauses ruling on the early repayment and withdrawal.
On the other hand, a loan consisting of a contract for grouping consumer credits can be greater than 75,000 USD. In addition, and for information, the minimum amount for a consumer credit repurchase is evaluated at 1,500 USD.
What can we finance with a buyout of consumer loans?
The consumer loan allows:
- to buy movable property (capital goods for the home or the person, car, etc.) or the provision of services (travel, etc.);
- to have cash;
- to pay for housing work (except if the repurchase of credit includes a mortgage guarantee);
- to contract a rental with option to purchase (LOA);
- to group together several consumer credits in progress, including if the amount of the loan is greater than $ 75,000 and if the loan guarantee is not a mortgage.
What types of consumer loans can you combine?
The repurchase of consumer credits consists in regrouping in a single loan all the current consumer credits. However, there is not just one type of consumer credit. Among the associated banking products, we can cite:
- affected credit: this is a loan reserved for a specific project. Example: the funds of a car loan are necessarily dedicated to the purchase of a vehicle. Remember that the transaction lapses if the credit is canceled or if the good or service is not delivered;
- personal loan: this is a credit whose funds can be allocated at the discretion of the subscriber;
- revolving credit (revolving credit): it is a reserve of money loaned by a financial institution. The borrower pays interest on the sum only when he draws on this credit;
- student loan: this is a consumer loan guaranteed by the State, the loan amount and duration of which are established by the lending organization. The subscriber is under no obligation to link the funds lent to the direct or indirect financing of his studies;
- the authorized overdraft.
Good to know : the maximum duration of a consumer credit buy-back is 12 years.
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What are the consumer credit rates?
Consumer credit rates vary depending on the length of the loan and the amount of the loan. In order to attract and retain young customers, financial institutions appear more generous for student loans, the rates of which fluctuate between 0.8% and 3.5%. Standard personal loan rates offer a wider range, ranging from 2.5% up to 10%. Finally, the rates of affected consumer credits are on average between 4.5% and 9%.
Revolving credit stands out because of its evolving rates based on financial market rates. In other words: it is impossible to know the cost of the credit during the subscription. Taking into account the different criteria, the rate of a revolving credit can swell up to 20%, a real threat for unsophisticated borrowers. However, revolving credit often appeals to individuals in search of funds quickly. Faced with a lack of awareness of the final cost and the link with speculative stock markets, it is regularly criticized as a gateway to over-indebtedness.
Good to know : a financial institution applies a more advantageous real estate rate only if the grouping of loans consists of at least 60% of real estate loans.
Increase the maximum amount of a consumer credit buy-back thanks to the mortgage top-up
To obtain a consumer credit buyout, the borrower must present an acceptable feasibility record and guarantees to convince the lending organization to make an acceptable offer. The debt ratio necessarily enters the equation, knowing that the threshold after the repurchase of consumer credit must return to the standards of the financier.
A household in financial difficulty can thus have problems in obtaining the confidence of the banks. Homeowners can then include a mortgage guarantee, for example, to obtain a lower interest rate or to extend the repayment tenure. Others may obtain a modulation of the amount of the maturities over time. This solution concerns owners who have already reimbursed a large part of their mortgage. They have an envelope coinciding with the amount of capital already reimbursed.
Example: the couple has a house estimated at 180,000 $. With the 30% discount, the financial institution will estimate its value at $ 126,000. The remainder to be paid is $ 100,000, so their available mortgage reserve amounts to $ 26,000. The couple can increase the amount of their loan repurchase by guaranteeing it with a mortgage recharge of $ 26,000.