Buy back credits and adjust monthly payments
The option of the modulation of maturities is the main characteristic of modular loans (real estate and consumption), it allows among other things to revise up or down its monthly payments, during the term of repayment of credit. How does it relate to credit consolidation?
Credit, upward modulation: advantages and limits
In the context of a loan, whether real estate or consumer, the upward modulation consists in increasing the amount of its maturities.
This option automatically reduces the repayment period and lowers the total cost of the credit. Thus, the borrower lowers the cost of his loan by paying less interest and insurance in the end than what was provided for in the initial contract.
Minimizing the cost of borrowing is the main advantage of upgrading your current credit. In the event of an increase in income, the borrower may decide to repay more. This is financially attractive even if the increase in monthly payments is only a few dollars.
In addition, the upward modulation also makes it possible to exceed the reasonable debt ratio for banks. Consequence of other credit operations (real estate, consumption, consolidation, etc.) could be refused by lending institutions because of an insufficient repayment capacity.
Downward modulation: a necessity that can be expensive
The modulation in the fall is an option in some contracts credit, it reduces the amount of his monthly payments. This alternative makes it possible to anticipate a financially delicate period (unemployment, birth, death…) and must be used only in case of absolute necessity.
The decrease in the amount of the monthly payment via a downward modulation lengthens the duration of repayment of the credit and increases its total cost as well as the cost of insurance.
In addition, the possibilities of decline in modular credit contracts are very limited, the proportion downward is often lower than that authorized in the case of upward modulation.
In addition, there are very few credit institutions that allow the amount of their monthly payments to be lowered by more than 30% without imposing a maximum limit on extending the duration of the loan.
Modulation in credit consolidation
Unlike prepayment, which is one of the principles of credit consolidation, loan modulation is not subject to regulation. Thus, each bank has its formula, the modulation can therefore go up to 30% of the amount of the maturities, provided that certain criteria are met (debt capacity, repayment capacity, the rest for living, etc.).
However, the “upward” modulation can influence a credit buyback project in the event that it makes the debt capacity higher than the threshold authorized by the lender.
In addition, the option of downward or upward modulation may be included in a credit offer as part of a credit consolidation.