If you want to settle a loan, you will find in this article the advice for all types of credit and the best rates from our credit comparison. We will also recall what the law says to pay off your credit, in particular with regard to prepayment charges.
Credit Credit: The Law
You should know that a borrower can always make a prepayment in order to settle a loan in whole or in part. The law governs in particular the fees that the bank or the credit institution can charge.
Legislation to settle a mortgage
When you want to settle your mortgage, the sums at stake are extremely important, the law through article R.312-21 has therefore clarified things, and in the end it is quite simple to understand:
- The lender is entitled to an indemnity which cannot exceed 3% of the outstanding capital nor exceed one semester of interest at the average rate of the loan on the outstanding capital
- The credit agreement may prohibit repayments less than or equal to 10% of the initial amount
- You were able to negotiate at the signing of your home loan a clause indicating not to have penalties to settle his credit
- For loans taken out after June 30, 1999, no compensation is due if the balance of the credit is due to the resale of the property, or to geographic mobility due to the loss of a job or the death of the spouse
We will see later that to settle a mortgage, we go either through the resale of the property or through a repurchase of credit to get a better rate, it is this last point that we will detail.
Settle a consumer credit according to the law
To settle a consumer credit, there are several cases depending on the type of credit. Let’s start with the simplest case.
Under the consumer credit law for early repayment, there is no penalty:
- For revolving credit
- For bank overdrafts
- For a period during which your rate would be variable
- In the event of repayment by assumption of debt by credit insurance
If you wish to settle a consumer credit, there may be a penalty in the following cases:
- If your early repayment is of an amount greater than a 10,000 USD credit remaining due.
- In this case, the compensation may be a maximum of 1% of this amount if you have more than 12 months to reimburse otherwise, it is a maximum of 0.5%
- The early repayment indemnity cannot exceed the amount of agios that you have to reimburse
In summary, there are not many cases where you will have to pay an indemnity if you settle a consumer credit but we will see it in more detail.
Settle consumer credit
We will see that there are 2 main cases for which settling a consumer credit is an interesting operation from all points of view.
Settle revolving credit
It is an operation that we can only encourage! As a credit comparator specializing in the best rates, we encourage all our customers to settle their revolving credit, in particular for everything that is store credit.
Indeed, we have written many articles on store credit cards, their cost of membership, their loyalty program and of course their revolving credit and promotional operations when there are any. You will find, for example, cards on the Aurore card but also the Printemps card, the Asder card or the Bankcroal card.
In short, in each of our files, we indicate that these cards can be interesting, provided you do not have too much debt because the adjustable APR rates are often around 20% and in this case, the agios can explode very quickly !
We even did the calculation, for a credit debt of 4000 USD. We have raised the revolving credit rate of a very large organization which we compared with the best rate of our comparator in depreciable credit for the same repayment duration of 54 months:
- TAEG revolving credit rate: 15.76% monthly payment: 104.00 USD total cost of credit: 1606.00 USD.
- TAEG depreciable credit rate: 8.50% monthly payment: 88.80 USD total cost of the credit: 795.00 USD.
And in addition the rates have dropped since this comparison, but it is indeed 800 USD that it is possible to save on revolving credit for exactly the same credit. And in addition, as we have seen, if you pay a revolving credit, there is no prepayment fee to pay!
So don’t hesitate for a second and compare right away to find the best amortizable credit rates to settle your revolving credit as soon as possible:
If you want to settle several credits, you will not have the choice, it will be necessary to go through a redemption of credits, it is the law and that is what we will see right after.
The repurchase of credits
If for you, repurchase of credits evokes the fact of renegotiating your mortgage, we have addressed the subject in the following paragraph.
Redeeming credits means that you are going to pay off several credits and take over all existing debts in a single new credit whose repayment term will be extended.
The repurchase of credits is generally practiced for people having accumulated several credits and several debts and whose ends of the months became much too difficult to close. If you have accumulated too many credits, buying back credits can be a solution to get your head out of the water.
The repurchase of credits will settle several credits and debts and will have a long duration, which makes it possible to lower the monthly payment to be reimbursed each month. We also have within our comparator the best loan repurchase rates to settle a mortgage and consumer loans or only consumer loans.
Settle a mortgage
To make it very simple, settling a mortgage is particularly interesting in the case where you are looking for a lower rate than the one you currently own. It is the principle of the repurchase of mortgage.
NB : If you want to settle a loan simply because you have a cash inflow, it is only interesting if you have many years to repay. Because you should know that we mainly pay the interest on a mortgage at the start of a loan. At the end of the latter, you will almost only repay the capital and in this case, the credit will no longer have too much interest.
If you want to buy a home loan to get cheap credit and save money on the whole transaction, so that it is profitable here is what you need to know:
- The difference between your current rate and the new rate you plan to obtain should be approximately 1 point. That is to say that if you have 4% now, you will have to get 3% at the same date, which seems quite playable. (wholesale fixed current rates: 2% over 15 years; 2.30% over 20 years; 2.75% over 25 years; 3.30% over 30 years)
- The duration of the mortgage that you want to repay must still be long enough. Even if the cases are specific, it is generally necessary that there is more than 10 years of reimbursement.
- The prepayment penalties generated by the balance of the current mortgage will be included in the calculation of the overall transaction to ensure the interest of the redemption.
To quickly and easily find out if you are eligible, you just need to contact a specialized broker who can tell you in a few minutes by phone whether or not balancing a mortgage is interesting in your situation.
Not being a mortgage specialist, at Credither, we have partnered with Credicoa which is the number 3 mortgage broker in France. We chose them because they have a national network of agencies and especially because they take no cost to customers, like us and not like their 2 other main competitors!