Credit consolidation

The loan consolidation is a financial technique of consolidating various debts, various loans , consolidating them into one credit rescheduled over a longer duration. The borrower must no longer assume a single monthly payment , the monthly repayment charge is reduced.

Formerly designated by credit redemption , the term has been legally removed.

History

This practice highly developed in countries Anglo-Saxon has developed since the 1980s in France, notably because of excessive debt growing household particularly due to rising property prices and development of renewable credit or revolving. Banks also see it as a new growth segment as the retail banking sector matures.

Between 1980 and 1990, it was mainly German lenders who were the first to offer the French grouping of their loans in one. Thus, Credit Commerzbank and Hamburghyp Hypothekenbank intervene, only for homeowners or homeowners, in the form of mortgages.

In France, the RSGB bank ( Royal Saint George Bank ) and the CFCAL ( Crédit Foncier Communal Alsace Lorraine ) are the financial pioneers on the market for the purchase of credits 1 .

Economic and Social Data

Annual production

Consolidation of loans, represents an annual production of 2.7 billion euros (October 2012 to October 2013), up in October 2013 by 13.9% compared to October 2012, according to data from the Association of Financial Companies 2 .

The credit consolidation market is characterized by a very wide distribution of banking by Intermediaries in banking and payment services 3 .

Legal framework

The credit consolidation has a legal framework since the Law 2010-837 of July 10, 2010, transposing the European Directive on consumer credit (Directive CCD). These provisions are specified by the Consumer Code (Articles L. 313-11 and R. 313-11 et seq. Of this Code).

When the pooling of credits is carried out by an Intermediary in banking operations and payment services , the regulations specific to these professionals also apply 4 .

Loans and types of loan consolidation

Loans eligible for amalgamation of loans

The debts or receivables that can be grouped together are of different kinds: mortgage, personal loan, revolving credit, overdraft, family debt, or tax or rent delay.

The different types of grouping possible

  • Consolidation of consumer credit (LS1): the share of real estate outstanding must be less than 60% of the total amount of capital to be taken back.
  • Consolidation of real estate loans (LS2): the share of real estate outstanding must be greater than 60% of the total amount of capital to be taken back.

Advantages

The regrouping of credits and their rescheduling in a single monthly payment makes it possible to resolve the individual. The objective is also to reduce its debt ratio 5 below 33% of its income.

This operation offers the possibility to finance new projects affected (optional), and to improve its saving capacity thanks to the simplification of its budget.

Fees

The fees that accompany a consolidation of credits are of several kinds:

  • The cost of files of the bank which accepts the financing,
  • The guarantee fees (deposit or mortgage),
  • Intermediation fees in the case where the borrower goes through an intermediary in banking and payment services ,
  • Early redemption fees (Early Redemption Allowance) of previous loans,
  • Notary fees if a mortgage is part of the different credits pooled,
  • The extension of the repayment period may result in an increase in the total cost of credit.

References

  1. ↑ The History of Credit consolidation in France  [ archive ] on the site of Solutis
  2. ↑ http://www.asf-france.com/statistiques/Activiteadherents/201309-La-production-des-establissements-de-credit-specialises-9-premiers-mois-2013.pdf  [ archive ]
  3. ↑ Laurent Denis, ” Intermediate is not lending “, Village of Justice , ( read online  [ archive ] )
  4. ↑ http://blog.bcfinance.fr/intermediaires-bancaires-doublement-defenseurs-dinterets/  [ archive ]
  5. ↑ https://www.quechoisir.org/immobilier-logement/achat-vente-travaux/achat-vente-construction/actualite-prix-de-l-immobilier-c-est-le-moment-d-attendre  [ archive ]

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