The repayment term in a repurchase transaction is important, it will vary depending on the nature of the financing.
Credit redemption and repayment term
The loan buyback can have two ends, either to renegotiate the rate to save on interest, or to offer a reduction in monthly payments with what is referred to as the credit consolidation. In both cases, loans are bought by a new bank that will offer a contract with adjusted terms: fixed rate and rescheduled duration.
The borrower has several choices regarding its duration, it can for example opt for an identical duration, only the rate varies and in this case, it is rather adapted to the repurchase of mortgage. On the other hand, if the borrower wishes to extend the duration, it is the expected effect to lower the monthly payments, then the bank will propose a longer duration and in the respect of the legislation. Note that we can also shorten the duration, which has the effect of increasing the monthly payment but leads to a faster repayment of debt.
What is the maximum duration for the repurchase of credit?
There are two natures to be distinguished in this financing, the repurchase of mortgage credit and the purchase of consumer loan. The only difference is in the share of real estate loans to be taken over from the total repurchased, ie if more than 60% of the credits bought back are real estate loans, then it will be a repurchase of mortgage loan. On the other hand, if this share is lower, the operation set up will be a repurchase of consumer credit.
In terms of maximum repayment duration, there are large differences from one transaction to another, the consumer loan buyback can extend up to 144 months, which represents 12 years. The repurchase of mortgage can be subscribed for a maximum duration of 420 months, or 35 years. This duration is essentially linked to the existence of credit institutions offering mortgage repurchase, a financial product linked to a mortgage guarantee on the property of the borrower.
Simulate credit redemption times
As part of a project to buy credit, it is important to have a first idea of the monthly payment that can be obtained and the rate. For the duration, one can for example compare several proposals, that is to say ask to obtain an offer of repurchase of loans over 10 years, 15 years and 20 years. This makes it possible to visualize the monthly payments and to adjust according to its needs but also according to its capacities to repay.
The simulation is not binding, it validates the feasibility of a credit redemption operation and can be projected into the repayment of the new monthly payment. In addition, by using a comparator, the borrower can compare proposals and rates, which facilitates the negotiation of the best offer. It should be noted that insurance should not be forgotten in the purchase of credits, it can represent a significant part of the cost of financing.