Contrary to popular belief, the redemption of credits is not necessarily for people in debt distress. With rates close to those of real estate credit and borrowing conditions allowing for high cash, the credit consolidation is also advantageous for borrowers not over-indebted. Explanations from Romina Montery, head of the credit buyback division at Credither.
1. Is the redemption of loans especially for people in debt distress?
No. Moreover 1/3 of our customers are not in a real situation of overindebtedness (especially if it has high incomes, it is the rest to live that counts). With a debt ratio of 40%, the restructuring banks do not necessarily consider that the household is over-indebted. If it seeks to carry out another real estate or financial transaction, it may request a consolidation of credits. This operation may for example allow it to borrow again in a “traditional” bank. We can indeed reduce these households to a rate of 15 or even 16% of indebtedness (depending on the profiles) which may allow them, for example, to buy a second home, to carry out heavy work, etc.
2. What other reasons might such households have for pooling their credits?
Indeed, these households are not over-indebted but may wish to reduce their debt ratio to acquire a new property for example or simply to increase their cash flow at the end of the month in order to save more or to make financial investments. Other borrowers seek to consolidate their loans, keeping an interest rate very close to that of their mortgage (around 4.85% depending on the profile), while obtaining significant cash and very often without having to justify the use. This can be up to 60,000 euros, depending on the profile of the borrower and the mortgaged property. For example, a person with 3 credits in progress, two mortgages (primary and secondary residence) and a small credit work, wants to buy a high-end car. With a credit conso it will have a higher interest rate and therefore benefits from its pool of credit to request additional cash and buy his car with an interest rate almost equal to those down mortgage. The operation is profitable. There are others who take advantage of this cash to acquire goods more difficult to finance through conventional credits such as, a property abroad, a boat or a collector car.