Having become a full-fledged bank, the takeover and renegotiation of loans are on the rise. However, these banking operations can not be improvised and need to ask some questions before starting. Here’s what you need to know
With historically low interest rates, there is good reason for credit holders to choose to renegotiate interest rates or buy back home loans. However, what is the difference between a buyout and a credit renegotiation?
Even if from the borrower point of view, the benefits remain the same (obtain an attractive interest rate, reduce monthly payments, reduce the debt ratio, etc.), loan redemption and renegotiation differ from a technical point of view. and financial.
Thus, in the case of a redemption, the remaining principal owed on the initial financing is fully settled by means of a new loan granted by a new bank on more attractive terms and at a competitive borrowing rate. This gives rise to the payment of early repayment indemnities (IRA), the introduction of a new guarantee and the subscription of a new borrower insurance policy.
As part of a loan renegotiation, the borrower negotiates directly with his bank an amendment to the initial contract. It consists of an amendment of the initial terms of the loan with the same bank. In other words, renegotiation involves asking your bank for more favorable financing terms.
In addition, credit renegotiation represents a loss for banks. Thus, some rarely accept this operation. They therefore prefer to let their customers redeem their outstanding amounts by the competition
In today’s environment of attractive lending conditions and fierce competition from lending institutions, the most sophisticated borrowers will place banking institutions in competition with one another and simply opt for the lending institutions. offers the most attractive, whether from their initial bank (renegotiation) or another bank (redemption).
Namely, depending on his profile and the quality of his relationship with his bank, a borrower can be content with the offer proposed by the original lender and aim exclusively renegotiation, especially if he is satisfied with the services of his bank.
However, to put the odds on one’s side, the borrower can try to put the pressure on by acting as if he is ready to leave. For this, we must take care to arrive at the appointment with his advisor with several competing offers to repurchase his outstanding.
Moreover, if the desire to claim the best offers in force is more important than staying in one’s bank, it is recommended to bet everything on the loan buyback (or also called consolidation of credits). For this, it is recommended to solicit several banks or opt for a specialized banking intermediary such as Good Finance who will find the best offer from its banking partners.
Consisting of substituting a current loan with a new loan at a reduced rate, the repurchase of the loan implies, depending on the case, the constitution of the freeing of the mortgage or the renewal of the deposit, the subscription of a new guarantee and a new borrower insurance contract (group insurance or borrower insurance delegation) …
As for the renegotiation, it does not lead to the subscription of a new guarantee, nor the establishment of a new borrower insurance contract. From this point of view, it appears more flexible. However, things are not that simple.
In most cases, an owner who is able to claim the best offers in force and courted by competing institutions, will have to choose between a very attractive offer to buy a loan and a proposal from his bank that are less interesting, but better than initial conditions.
In this configuration, it must take into account several factors. Its decision must depend on the remaining outstanding capital of its outstandings, the difference between the initial rate and that proposed for the operation, the remaining term of the repayments.