The right solutions against debt

When you are an owner

An owner who combines real estate loans and consumption may have an interest in grouping all his debts in a single basket. He will then be left with a single monthly payment, the amount of which is less than the sum of all the monthly payments on his current credits.

Because a debt problem does not necessarily come from the accumulation of debts. It really comes from the amount of all the monthly payments. Often the subscriber has opened lines of consumer loans without worrying about their impact on their budget.

You should know that when the real estate debt represents more than 60% of the whole, the buyer has the obligation to apply a real estate rate on the grouping of credits.

For information: the average consumer rate was 3.51% in December 2019, while the average property rate was limited to 1.17% (source: Banque de France).

When you are a tenant

A tenant's debt problems are caused by an accumulation of consumer loans. But it also has solutions for buying back loans for tenants, without the need to provide mortgage guarantees. Specialized companies will be happy to process his file, especially if the amount to be taken over exceeds 10,000 €.

On the other hand those who are bothered only by small sums will often be slammed the door in the nose. Don't panic, there are solutions.

First of all, revolving credit can be changed to conventional credit, it is the law and the lender cannot refuse it. On the other hand, he can apply the rate he wishes, without exceeding the usury ceiling imposed by the Banque de France. So before accepting his proposal, it is advisable to play the competition.

For info: in median people in over-indebtedness have € 12,734 in consumer credit (source: Banque de France typological survey on over-indebtedness).

When you no longer know how to get out of debt

Homeowners may be refused a loan consolidation. This is particularly the case when they are self-employed or unemployed. If they can't find a solution to at least repay their property, they run the risk of losing it.

They may then have an interest in turning to repurchase sales. In this configuration an investor buys their property, but they continue to occupy it and above all they benefit from a right of redemption.

Finally when there is no solution against debt, and when it becomes impossible to pay all its debts, it is time to appeal to the over -indebtedness commission of the Banque de France. The members will accept the dossier submitted to them if the individual's income does not allow him to pay his debt. They can then impose a repayment plan on creditors.

For info: in 2018 the courts canceled 30% of the debt of people declared in over-indebtedness.

Bad solutions against debt

1- Take out renewable credits

Revolving credit is a permanent reserve of money that is automatically replenished with each return of capital. Since the lender only calculates the creditworthiness of borrowers once, he takes risks with each automatic renewal of the loan. Who says high risk says high rate, and in a revolving loan the rate can exceed 15%!

Example: € 200 is missing from the family budget to pay certain monthly payments. We, therefore, use a revolving credit repayable over 12 months, at 13% TEG. We, therefore, pay the drafts with this 200 €, and next month we will have to reimburse about 20 € above. This month the family was short of 200 €, next month they will be short of 220 € . And so on.

FYI: revolving loans are found in 66.3% of over-indebtedness files, for a median amount of € 6,175.

2- Use payment cards of large surfaces

When the end of the month is difficult, the solution of payment cards provided by supermarkets is very tempting. No cash needed, we put the plastic rectangle in the slot and we will pay in 30 days. The problem is that you will probably have to pay 10% interest on it. In the end, the food budget increases by 10% per month.

Example: a family uses the payment card of a hypermarket to pay 500 € of food for the month. This card actually hides a revolving credit repayable over 12 months, at the rate of 15%. Next month, his food budget will cost him the usual € 500, plus € 46 (capital and interest) to repay the revolving loan. You will now have to find € 546 to eat.

3- Take out small personal loans

The personal loan is a consumer credit not allocated to a particular purchase. It is often sold as a loan of money without proof of expenditure , which pleases households in difficulty.

Banks ask for a lot of proof of income, while specialized credit companies are less careful. This type of financial institution too often appears as a solution against debt.

However, the rates are particularly high on the small amounts, those which one needs to pay his debts and see coming. In the end, we find ourselves even more in debt the following month.

Example: a small personal loan of 1000 € is generally reimbursed with a TEG of 15%. The higher the amount, the lower the rate is the trap.

4- Take out a mortgage for cash

Banks and credit companies easily grant personal loans without proof of expenditure, if they are covered by a mortgage guarantee. Homeowners can borrow even if they haven't finished paying off their credit.

This solution can be interesting for works aimed at improving the quality of housing, but should not constitute a solution against debt. Because without an increase in income we risk not being able to repay these new monthly payments. The lender will then have the right to turn over the property.

Example: this family has debt problems following Madame's economic layoff. Parents redeem their mortgage and include a mortgage of € 20,000. However, Madame still cannot find a job, so the family's income is no longer enough. If they don't pay the next monthly payment on this mortgage, their bank can foreclose on their home.

5- Borrow between individuals on the Internet

Loans between individuals are authorized by the Consumer Code. However, the rate must not exceed the usury rate of the Banque de France.

Question: why would the good samaritans who flourish on the internet go to lend you money for no consideration? Answer: because it is a scam .

You must realize that if no bank or legal loan company has accepted you, it is because you are unlikely to be able to repay. Online scammers know this, and will have no qualms about saving you a few hundred dollars.

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