The credit is a practice that has largely developed in recent years. Mostly favored by brokers, where almost 40% of the files concern such an operation, the credit is a solution to adjust your budget, by rescheduling your current credits in a less expensive way.
The transaction consists of two mandatory steps: early repayment of the original loan and subscription of a new loan.
When one decides to subscribe to this process, one will have to choose between modifying the duration of the loan or changing the amount of the monthly payment. These are the two variables on which we can act. Of course, your goal will be to get the least expensive variant, a gain of a few thousand or even tens of thousands of euros, and a reduction in credit duration of a few years.
When is it appropriate to make a credit?
Initiating such an operation is not easy and often involves moving from one banking institution to another. The credit means repaying the original loan by lending through another credit contracted under more favorable terms usually from a competing banking institution. We must, therefore, analyze the situation because it is not always worthwhile to take the step.
Specialists recommend the credit in case there are visible benefits, namely:
– the interest rate differential is at least one point; according to others, a difference of 0.70 points would be sufficient to consider a credit;
– the credit is fairly recent to take advantage of a more favorable amortization of interest;
– the outstanding capital amounts to a significant amount (ie at least € 50,000).
Finally, once the decision is made after a judicious weighing of all these factors, the borrower will fill again some formalities: to provide justifying documents, to inform the banker on the other credits contracted, to carry out the lifting of the mortgage loan in the case of an initial loan with guarantee and take a new guarantee for new credit etc.
A new contract is also accompanied by new expenses: the notary fees related to the guarantees, the prepayment penalties of the initial loan, the handling fees.