Suspension, early repayment, modulation: what are the possible options for a loan, whether it be a consumer loan or a home loan? Is it necessary to subscribe to all the options upstream of the contract, or is it possible to add some during the repayment of the credit? Here is what you need to know before signing the contract.
The suspension of credit repayment
Depending on your contract and its conditions, you may be able to take a break in repaying a loan. We also speak of ” postponement of maturity “, since the monthly payments normally due can be postponed over time. To benefit from this deferral of monthly payments, you must contact the credit institution and indicate your difficulty in honoring your monthly payments. The deferral can be implemented for a period of generally up to six months. Please note, suspending a loan has a cost: interest is payable, and it is even possible that the monthly payments may be increased. The total cost of this delay will be passed on to your remaining installments once the reimbursement is restarted.
How to manage the credits?
The modulation of the monthly payments of the credit. Always depending on the credit options that you validated at the time of signing the contract, it is sometimes possible to adjust the monthly payments of a loan. Thus, as a general rule, after at least one year of repayment, the monthly payment of a mortgage may be revised up or down within the limit of 10%. What is the advantage of this modulation? It makes it possible to face financial difficulties by reducing the cost of credit per month, or on the contrary to accelerate the repayment by increasing the monthly amount. Each bank sets the rules. Keep in mind that modulation cannot be used repeatedly, and can usually only be used once a year.
Early repayment of a loan, an attractive option in the event of cash receipts
Have you received a large sum of money as a result of an inheritance, the payment of a bonus or the sale of real estate? Do you want to mobilize this sum to prepay a consumer loan or a mortgage? This is entirely possible and legal. Please note, however, costs will apply, namely early redemption indemnities (IRA).
These indemnities are limited to 1% of the amount of the early repayment for a consumer credit greater than $ 10,000 whose maturity is more than one year, and to 0.5% if the credit has entered its last year.
For a mortgage, the amount of compensation requested cannot exceed six months’ interest from the sums reimbursed at the average rate of the loan, nor 3% of the principal remaining due.
Some banks have loans that can be transferred. This is an option that allows you to keep a loan in the process of being repaid for real estate once it has been sold. So what? You keep the conditions negotiated when the first loan was signed, and in particular the rate conditions, which may prove to be much more attractive than those in force when buying a new property.
Request credit options
Whether it is a question of early repayment of a loan, modulation or even the stopping of monthly payments, it is important to ask for these options when signing the offer. In fact, not all banks have the same conditions in their credit contract. Some will therefore immediately offer to adjust the monthly payments of the loan, while others will provide for a break at no cost. Conversely, in other banking establishments, no facilities will be provided in the event of financial difficulties.
It’s up to you to make the request for this adaptability of the contract to mitigate any eventuality. These credit options are “facilities” that the bank can grant you during a negotiation. You can negotiate the prepayment indemnities and eliminate them entirely, but also add the transferability of a loan when the credit did not originally provide for it, by being persuasive!