The consolidation of credits is not an operation to be taken lightly. Demonstration. (Credits: © ALF Photo – stock.adobe.com)
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Application fees, borrower insurance, early repayment indemnities … the list of costs to be taken into account during a loan consolidation is long, but it is imperative to know to avoid the cold shower!
By MoneyVox,
With a 20% increase in requests in 2020 according to the online broker Meilleurtaux.com, credit consolidation is on the rise. A notoriety which should not make us forget that certain costs can tip the balance in the bad side. It is therefore necessary to review the costs that this type of transaction may generate before making any final decision. The list of costs relating to a loan consolidation.
Why are the French consolidating their credits?
Grouping of credits allows you to combine several debts into one. This can be, for example, the grouping of a real estate loan, a consumer credit and a revolving loan.
Originally, loan consolidation was mainly used by households experiencing financial difficulties, particularly over-indebtedness. Now, other profiles are using it in order to free up leeway for other projects or to take out new additional credit. Thus Meilleurtaux.com, one of the main online brokers, recorded a 20% increase in grouping requests during the year 2020.
What interest rate for a credit consolidation?
Compared to a standard amortizing loan, a loan consolidation costs more. This additional cost must be taken into account in order to study the final interest of the operation … but it is still necessary to know where to look. The first variable that plays a major role is the interest rate. During a credit consolidation, the bank takes more risk, in particular if the household has payment difficulties, a high debt ratio or the financing period is long.
This risk, the bank counterbalances with a higher interest rate, in particular if the financing is granted without a real estate mortgage, if it is a consumer loan or if the borrowers are tenants of their main residence. .
An operation that can be (very) expensive
The interest rate is not the only variable to take into account when measuring the cost of a credit consolidation. You also have to deal with other unavoidable costs. In addition to the classic administrative fees due to the bank, generally set at 1% of the borrowed capital with a ceiling of 1,500 euros, borrowers must pay brokerage fees, almost all files of this type passing through an intermediary because of their complexity. On average, this commission costs 1.77% of the amount borrowed under the mortgage loan scheme with mortgage guarantee and 3.17% under the consumer loan scheme with mortgage.
The mortgage, too, has a cost: that of the notary fees, a formality necessary for the registration of this guarantee which secures the bank. Borrower insurance contributions should also be taken into account, which can be costly once a health problem is reported or for older borrowers. Finally, early repayment indemnities are due for most of the loans repaid thanks to this operation, up to 1% of the capital remaining due in general.
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