Often confused, credit consolidation and credit buyout do not have the same outcomes, although their objectives are the same. Let’s take a closer look.
Simulate your credit consolidation
In 2016, mortgage loan interest rates dropped remarkably. As a result, many borrowers took the opportunity to renegotiate their loan rates.
To change the rate of a mortgage loan, three operations are possible: renegotiation, credit consolidation, and credit buyout.
Credit renegotiation involves reconsidering the rate with the bank that granted the loan. But what about the other options?
Credit Consolidation or Credit Buyout?
We refer to a credit buyout when a banking institution buys out a mortgage loan that was contracted at another bank. In doing so, the borrower pays off their loan to take out another one elsewhere. Through this operation, the loan term may be shortened while optimizing the fixed rate.
Credit consolidation, on the other hand, involves combining multiple loans into a single credit. To accomplish this, the bank must buy out the different debts of the borrower. This is why credit consolidation can, in some ways, be likened to a loan buyout.
However, whether it is a credit buyout or a credit consolidation, these operations incur costs. In order to settle a current loan, the borrower needs to pay early repayment indemnities. In addition to this, of course, is the total capital that the borrowing household owes to the banking institution. Nevertheless, these indemnities are capped by law and cannot exceed 3% of the remaining capital to be paid.
If you have more questions about credit consolidation or credit buyout, feel free to contact us.
