Debt consolidation loan: what is it?

 

In Switzerland, the term debt consolidation loan is relatively little used: it is preferred to the term credit buyback. What is this solution, who is it for, and does it really save money? Our advice and explanations.

What is it about?

What is it about?

The term debt consolidation loan is generally used in France or in Canada. As the name suggests, this financial solution is a personal loan that will be used to consolidate your debts. In concrete terms, this product makes it possible to replace all of its commitments with a single, generally more advantageous loan. The money from the loan will then be used to repay the debts thus consolidated. In Switzerland, we talk more readily of credit repurchase or credit consolidation.

An example

An example

Mr Dupont currently has a loan for which he pays a monthly payment of 333 USD / month. He still has 5,000 USD to reimburse. In addition, having used his credit card a lot, it ends up with a negative balance of 2,000 USD. In total, it is 7,000 USD of debt that he wishes to consolidate with a debt consolidation loan. To do this, Mr. Dupont will take a new credit of 7,000 USD which will be used:

  • To repay his previous credit
  • To reimburse the balance of his credit card

With an interest rate of 7.9% over a period of 36 months, this new so-called consolidation loan will involve a monthly cost of 218.20 USD!

What can we group?

What can we group?

In Switzerland, it is possible to use a credit repurchase in order to group together the following commitments:

  • Private loans
  • Credit card outstanding balance (Visa / Mastercard / Other)
  • Private leasing

Advantages

This financial solution essentially provides two advantages: consolidation of debts, as well as a reduction in monthly payments. Indeed, with a debt consolidation loan, the borrower is left with a single loan to repay and manage instead of several monthly bills. In addition, by renegotiating on the interest rate and the duration of the loan, it is possible to obtain savings of up to 40% on its monthly payments (depending on the situation).

Which address?

Which address?

A debt consolidation loan is considered a private loan within the meaning of the law. It is therefore quite possible to contact a broker or a credit agency. If necessary, Best Bank also offers debt consolidation solutions with the possibility of obtaining a free and non-binding assessment leading to an individualized proposal. In all cases, as with any credit request, it is recommended to avoid making too many requests,which could lead to a negative history with the credit center.

About the Author