What is a debt renegotiation? Explanations and benefits – Consolidation of Loans
The renegotiation of the debt, also known under the name of repurchase of the debt, allows in principle to lighten your monthly installments. However, improving the budget varies from one situation to another. But in what case can this solution be advantageous? What should you pay attention to and how much can you save? We offer you an analysis of the products.
What is a debt renegotiation?
Renegotiation, repurchase, grouping of credit, this financial product has different denominations. The principle remains the same: a typical consumer loan is fully repaid by a new loan. The new loan replaces the old one, but with different contractual methods which, however, allow the monthly cost to be lowered. In addition to the repurchase of the credit itself, it is also possible to use the new loan to repay other credits such as: leasing and unpaid credit card balances.
What is this solution for?
As the name suggests, this service is used to renegotiate current debt. In practice, it is essentially a matter of obtaining a cash supplement, or a decrease in monthly payments, or sometimes both at the same time. In practice, debt renegotiation allows you to:
- Get more benefits on the new loan. The possibility of reduction will depend on the current rate. In fact, obtaining a rate reduction when you have 9.9% will certainly be simpler than if the latter is at 6.9% for example.
- Extend the repayment term. If the current credit is to be repaid in 12 months, extending the term will allow you to significantly decrease your monthly bills.
- Get a cash supplement. This solution may also be associated with a rate reduction and repayment duration.
- Group other ongoing loans such as: general credit, unpaid credit card balances or leasing. In addition to the financial interest, this solution presents a practical interest as it allows you to group several invoices into one and to have a better overview to manage your budget.
For example if you consider that, a repurchase of credit easily allows you to save up to 40% on monthly bills. In this kind of situation it is important to be able to count on a sector specialist such as WiseUs Credit, at the same time active both in the repurchase and in the grouping of debts, and take advantage of the best possible offer.
A new contract
An important point to consider is the fact that the grouping of credit requires the stipulation of a new consumer credit agreement. As such, repurchase has the same limits and conditions. It is important to know that this solution is not aimed at people with executive orders, Zek codes or simply insufficient income to ensure the repayment of the monthly installments.
When to apply for this product?
Ideally as soon as possible. In fact, anyone who repays a consumer loan in full before the end of the term receives the interest paid back. This also applies in the event of a loan renegotiation. Carrying out a consolidation as soon as possible after the conclusion of a loan contract allows you to minimize the interest paid. In addition, lowering the monthly payment is sometimes at the expense of the total interest costs. In fact, a longer repayment period reduces the monthly cost, but increases the total interest paid. A rate reduction, on the other hand, reduces both total interest and monthly payments.
Let’s take the example of Mr. Porri who has a credit of USD 15,000 in 24 months, an invoice of USD 5,000 on his Mastercard and USD 2,000 on Visa. The loan has a rate of 9.9%, that of its credit cards of 12%. He pays 688 USD monthly for his private loan, in addition to about 326 USD, for the repayment of credit card balances. In total, he currently spends 1,014 USD per month, including interest and repayment. The total interest in all debts is 2,385 USD.
With a loan repurchase of 22,000 USD (credit balance + Mastercard + Visa) over a period of 24 months and a rate decreased to 7.9%:
- The monthly cost drops to 991 USD per month
- The total interest is 1’790 USD
- Mr. Porri reimburses a total of 23’790 USD
With a loan repurchase of 22,000 USD over a period of 36 months and a rate of 7.9%:
- The monthly cost drops to 686 USD per month
- Total interest rises to 2,683 USD
- Mr. Porri reimburses a total of 24’683 USD
The importance of appealing to a specialist
The calculation for a grouping of debt can quickly become complicated. For this reason, in order to make a good decision, it is important to calculate the exact cost per month and the total for each option. However, the best thing to do is always to contact a specialist in the sector and find the solution closest to your needs. In this regard BestIn Credit offers a free analysis that will lead you to tailor-made solutions, helping you find the best solution.