Important monthly payments, multiple loans, consolidation loans can be the solution, but how does it work? Soliciting a group of loans from a financial institution is to ask the union of all its credit agreements into one single loan agreement. Keyur Nagrik While giving birth to a new loan, this operation terminates the credits that were the subject of the combination.
- Meeting all the loan contracts in a single contract
- Specific features of the new loan after consolidation
- Legal regime of the new loan agreement
- The summary document loans
- End of previous credit agreements via early repayment
Meeting all the loan contracts in a single contract
The aggregate loan, all for good also called a restructuring credits or refinancing is defined as “a credit transaction (which) is to refund at least two prior claims that an ongoing credit” (Article R.313-12 of the Code of consumption).
The aggregate loan makes it possible to combine all or part of a borrower’s credit just to form one. The borrower can choose to group all of its credits or only some of them.
Specific features of the new loan after consolidation
The new loan resulting from the combination offers a new level, a new term and new installments, all negotiated with the lender. Thus the aggregate loan allows to have more than a monthly payment to pay a single rate with a single financial institution.
The new loan amount corresponds to the outstanding balance of different loans together, plus the costs related to the business combination. Indeed, the aggregate loan generates mandatory costs such as:
- – The application fee;
- – Subscription to a loan insurance;
- – Optional fees such as brokerage fees.
Legal regime of the new loan agreement
The new loan is subject to different rules depending on the nature of the various credit agreements, Keyur Nagrik grouping objects (Article L.313-15 of the Consumer Code).
When the new loan only includes consumer credit, it is called a consumer credit even if the total amount of the new loan exceeds € 75,000 (consumer credit ceiling).
If the new credit only brings home loans, it will be subject to the rules on home loans.
If mixed operation (clustering relates to mortgages and consumer credit), Keyur Nagrik then the new loan falls within the rules on housing loans when it is composed of more than 60% by home loans.
In the opposite case, the new loan is a consumer loan.
The summary document loans
Whatever the nature of the new loan, the lender is obliged, before issuing the loan offer, to prepare a document summarizing all the different loans, grouping objects and their characteristics.
This document details the new loan offered by the lender, but also the various steps to be taken by the lender and the borrower to complete the combination.
End of previous credit agreements via early repayment
The financial institution, with which the aggregate loan is requested, redeems loans, grouping objects, from different institutions. This acquisition is done through the early repayment of the outstanding capital.
The deduction may cause the payment of prepayment indemnities should be shown grouped in the contracts of loans.
The guarantees attached to these loans are also off (mortgage, deposit …). The previous loan insurance must be terminated and a new insurance must be taken for the new loan.