Purchase of credits for over-indebted tenant

Purchase of credits for over-indebted tenant

Getting out of a difficult financial situation when you are not a property owner is sometimes an obstacle course. Even if the grouping of consumer loans is possible, a file of repurchase of tenant loans often results in a refusal, the banks being particularly cautious when it comes to lending to households unable to provide solid guarantees.  

What debts and loans are affected? Who to contact for this type of operation? What supporting documents must be attached? What are the pitfalls to avoid? What fees will you have to pay? What if you are FICP registered? Do you need to take out borrower insurance? What is the maximum repayment term? What alternative to buying back credit in case of refusal? A costed example to finish

Debts and credits you can consolidate

Debts and credits you can consolidate

There is no exhaustive list of debts admitted to a tenant loan consolidation operation or a maximum ceiling except that set by the Consumer Code, namely $ 75,000. For the borrower, the only objective of the new financing is to achieve a triple result:

  1. Get a single loan repayment monthly lower than the total of the current installments.
  2. Reduce the debt ratio below 33% of revenues.
  3. Balance the budget in a sustainable way and have cash in advance.

Consumer loans

They can all be integrated into the grouping: assigned credit (car, work, etc.), personal loan and revolving credit.

Bank overdrafts

They constitute a form of credit and as such must be repaid. When their amount exceeds the authorized ceiling over a period exceeding 3 months, the bank must demand immediate repayment or send you a prior offer which will transform the overdraft into a loan.

Debts to the Administration

In case you have not paid your housing tax or if you have not been able to honor your last income tax deduction, you can include them in the buy-back transaction.
Please note: it is not possible to have the administration paid directly by the bank. You have to pay yourself with the balance of the loan transferred to your bank account.

Unpaid invoices

You can consolidate all your arrears : rental charges, various invoices (Water, Electricity, gas, etc.) or late rents. Note that it is not essential to have supporting documents. It is up to you to establish the list of redeemable debts and calculate the amount.

Organizations you can contact

Organizations you can contact

Given the difficulties that tenants sometimes have in getting their request through, the use of a broker can prove useful. Note, however, that firms that claim to specialize in credit buyback operations do not always have the legal and technical skills to handle this type of request. You will therefore have to be vigilant when selecting your intermediary and playing the widest possible competition.

Credit repurchase brokers

The use of a brokerage firm is justified if your file is difficult or if your situation requires a certain urgency. It is a great asset, provided you come across a competent and efficient intermediary. To do this, the selection of your advisor must be based on objective criteria:

  • Compliance with regulations: your broker must be registered with Siadas and have purchased professional liability insurance.
  • Plurality of partners: beware, some firms are mere sole agents of Credit Institutions. They will therefore not compete for you. Prefer independent firms that work with several lending organizations.
  • Professional skills: the repurchase of credits requires a lot of knowledge, because it integrates legal data and calls upon complex banking techniques.
  • Multiple services: it is preferable that your broker is also an intermediary in insurance brokerage. It will thus be possible for him to offer you an external delegation.
  • Fees: in addition to bank commissions, many firms take fees. Ask to know the amount from the first interview.

Our advice: do not give preference to a broker because it is free. It is above all his skills and his network of partners that must hold your attention.

Independent brokers

Many local brokers are attracted to the high level of commissions in this type of activity. But if some have sufficient training and experience to provide you with the best service, others, on the other hand, do not have sufficient knowledge of banking techniques.
Our advice: do not hesitate to check the professional background of your advisor and ask him how long he has been practicing in the field of loan buy-back.

Network banks

Most traditional banks are present in the loan consolidation market. Interest rates are better than those of specialized agencies, but the selection is also more stringent. Better to present a good file if you are a tenant. You will also need to open a new bank account and direct your income there.

List of documents to be supplied and conditions for granting a tenant loan buyback

List of documents to be supplied and conditions for granting a tenant loan buyback

If there is no difficulty in putting together a loan buy-back file, it is advisable to take special care and be diligent in order to avoid unnecessary back and forth trips which would waste time. to everybody. A way to score points with the lender and show them that you are serious.
Important: the risk analysis is based on a global approach, it is imperative that your file contains strong points to compensate for the absence of mortgage guarantee.

professional situation

The borrower’s income is verified on the basis of the last 3 months of salary or a photocopy of the last pension payment slip if you are retired. If you are an employee, it is better to be on a CDI, because tenants on CDD generally face a refusal. If your hiring is recent and your employment contract includes a trial period, you will have to wait for the expiration of the deadline to make your request.

Financial situation

Financial situation

The analysis is carried out on the basis of your last tax assessment, the last 3 bank statements and amortization tables for all loans in progress. The banker knows that if you request a loan buy-back, it means that your financial situation has deteriorated. So don’t worry if your accounts have negative balances.
On the other hand, if you have payment incidents or if you have taken out a new consumer credit when you were already over-indebted, there is little chance that your request will succeed.

Other photocopies to provide

  • Family record book
  • Valid ID
  • Residential lease and last rent receipt.

Note: if you contact a broker, it will be responsible for collecting the necessary supporting documents to forward them to its financial partners.

Traps to avoid

Traps to avoid

The result of an investigation by the Directorate-General for Competition, Consumer Affairs and the Suppression of Fraud has shown that one in five intermediaries operating on the loan pooling market was in breach.
You must therefore exercise extreme caution and take maximum precautions before committing. Here are the disadvantages of buying back tenant credit and the most common pitfalls to avoid:

  • Unsuitable solutions: the restructuring operation must adapt to your situation and not vice versa. The duration of the new loan should allow you to lower your debt ratio below 33% and rebalance the budget so that you no longer have to worry about the end of the month.
  • The incentive to take out a savings contract: “life insurance” type contracts are sources of remuneration for brokers and specialized establishments. The only purpose of the credit buyback operation is to rebalance your budget. If you have savings capacity, so much the better. But don’t create any monthly payment constraints.
  • Subscription of an excessively large cash buffer: having capital in advance provides financial security, provided that it is not used to finance a new project. Limit its amount to what is strictly necessary.

The costs that will be claimed from you

The costs that will be claimed from you

A loan buy-back transaction is far from free. The administrative fees charged by the organizations are even significantly higher than for conventional financing. You will have to add the broker’s fees if you choose to entrust your file to an intermediary.
Our advice: if you do not have the money to advance the costs, you can ask to add them to the loan amount. Their integration will have only a small impact on the monthly payment and the total cost.

Application fee

They are taken by the lender. Be aware that they can reach 7% of the amount borrowed.

 

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