The solution of repurchase or regrouping of credit is often praised by the agencies of loan like allowing to realize substantial savings on its monthly payments. This week, we suggest that you study this case with a plausible example of credit repurchase.
For our example of credit repurchase, imagine the situation of a certain Mr Earnie. Three years ago, Mr Earnie took out a personal loan of 50,000 dollars over 4 years, with a rate of 9.90%. Recently, he has more than used his visa card and finds himself unable to reimburse it for the 3,000 dollars used. He therefore decided to spread the reimbursement of these 3,000 dollars over 12 months. The organization that issued its visa card also imposes an interest rate of 12.5%. In the end, what does Mr Earnie pay each month?
- For his credit: 1,255 dollars (interest included), he has 12 months to pay
- For his credit card: around 270 dollars (the total interest paid would then be more than 200 dollars over the 12 months planned)
- Or a total monthly payment of 1,325 dollars / month
Example of credit repurchase over 12 months
Mr Earnie then opted for the consolidation solution. He manages to consolidate all his commitments (loan and Visa card balance) and obtains an offer with a rate of 7.9%. What will he pay in the end?
The exact amount will depend on the interest already paid to the bank. It is however possible to offer a fairly precise approximation by considering a new credit of 15,000 dollars over 12 months, with a rate of 7.9%, which generates a monthly payment of 1,302 dollars / month. The savings are therefore around 22 dollars / month, a total of more than 260 dollars over a year.
And over a longer period?
In addition to a possible rate cut and the regrouping of its commitments, the repurchase of credit makes it possible to reschedule its debt over a longer period. This solution then makes it possible to significantly reduce the monthly payments. Using Mr. Earnie’s example, how much will he pay per month? Approximately, we can calculate:
- If he chooses for a period of two years: around 675 dollars / month
- If he chooses for a period of three years: around 467 dollars / month
The monthly saving is then very concrete and even considerable! Please note, however, that debt rescheduling over a longer period of time may reduce the monthly payment, but may result in higher total interest. This is explained by the fact that the interest paid for a loan depends on the rate charged, but also and above all on the duration of the loan.
Assess your real situation
In the end, the calculation of savings is not trivial, because it depends on many factors. If you are in a situation or combining your commitments may be a solution, the best is to request a buyout offer from a specialist such as Mincredit. The latter will be able to help you assess your situation and offer you, more than an example of credit repurchase, a real calculation according to your specific situation.