Since the beginning of February 2017, it has become easier to change banks with the entry into force of the law for growth, activity and equal economic opportunities of July 6, 2015 (“Cogilaw Company”).
The deposit of a bank mobility mandate in the new bank is sufficient for the latter to take care of the transfer of all accounts. Should we therefore change banks when we carry out a loan buy-back? What is the difference between renegotiating loans and repurchasing credits? Here is a very useful update…
Credit redemption can be done independently of your usual bank
The repurchase of credits, or grouping of loans , consists in replacing your credits in progress by only one loan of restructuring, on the most advantageous conditions. With the decline in rates in recent years, the repurchase of loans has become a transaction particularly appreciated by borrowers. It offers in particular to find a new financial balance by lowering your monthly repayment, but also to simplify your budget and sometimes also to finance a new project by integrating an additional sum in the single loan which replaces your old credits.
This repurchase of loans does not imply to change bank and It can be done by preserving your direct debit. Indeed, during a grouping of loans, the new financing can be carried out independently of the bank of the borrower. Also you absolutely do not need to change banks, since the financial institution that will support your project will not require the opening of a new bank account. Your new monthly payment may be debited directly from your usual bank account.
What is the difference between buying back loans and renegotiating loans?
Do not confuse renegotiation of loans and repurchase of credits. These are two different financial transactions.
The loan renegotiation consists in contacting your usual banking establishment to review the conditions of the loan which it granted to you. Most often, the discussion focuses on the modulation of credit conditions, centered on the fall in the interest rate. In practice, the loan renegotiation operation is generally carried out by repaying your current loan before its term, then by repurchasing a new loan offered at a more advantageous interest rate. This renegotiation is therefore carried out directly with your usual establishment and it does not require any change of bank contact.
The credit repurchase transaction is carried out by consolidating the current credits of a borrower and then replacing them with a single credit. A loan buy-back is generally done by playing in competition. Even if it can operate independently of your bank, it can also be to contact other banking establishments to request the most advantageous offer.
In the short term, the repurchase of loans involves a series of expenses such as the early repayment of the loan (s) in progress, the payment of penalties (approx. 3% of the principal remaining due), the payment of file and mortgage for the subscription of the new credit. In addition, a loan repurchase is often done by extending the term of the new loan and increasing the total cost of your loans.
Despite these costs, a loan buy-back remains a very profitable operation for the borrower. On the one hand, it allows him to simplify his management, there is only one line of credit to be reimbursed. On the other hand, it allows you to appreciate a new savings or investment capacity by finding a balanced budget, with a reduction in monthly payments which can be very significant ( sometimes up to – 60% ).
Change bank and keep some of your credits in the old one?
As we have seen, the repurchase of credits also operates by bringing competition between the lending institutions. It can therefore be carried out with a bank different from your usual bank.
However, if you change banks, the credits that you have contracted with the latter cannot be transferred as simply as a specific account. You will then have several solutions.
Either your old credits are bought back in full by the new banking establishment from which you made your loan repurchase, and in this case, the problem no longer arises. Or else, you have carried out a loan repurchase which concerns only a part of your outstanding loans, for example your consumer loans, and your mortgage has remained in the old bank. In this case, you will set up a regular transfer from your new account to the establishment holding the credit to be reimbursed. Your old bank will have no right to object.