Revolving credit: points to watch out for buyout

This type of consumer credit is returning to a certain growth after 10 years of decline. However, it is necessary to know a few points of vigilance before subscribing to such an offer.

Revolving credit

Revolving credit

Long associated with bad debt situations, the production of revolving credit experienced growth of nearly 2% over one year in 2018, driven by the 3rd quarter with + 1.9% growth for 19 billion USD In progress.

Tighter legislation now governs revolving credit, notably with the Congilaw company. This type of product is therefore more secure, but it is necessary to remain cautious before subscribing. This is particularly the case with most of the large retailers, which highlight the free payment facilities that arise from their credit cards. However, the conditions of the offers are not always very clear and it is essential to check the specific conditions before considering a subscription. Indeed, using a credit card can be very expensive.

User costs

User costs

Most of the time, the major retailers offer payments in installments at no cost, to encourage consumers to subscribe to their credit card. However, charges for subsequent use are not often detailed.

You should know that the maximum authorized rate (or wear rate) on loans of an amount less than 3,000 USD is 21.2% at the start of 2019. Calculated by the Agree bank, this figure is one third higher than the average rate charged by lending institutions, which is around 16%. In addition, it is not uncommon for certain department stores to add insurance against the loss or theft of means of payment, which adds an additional cost to the use of such a service.

Redemption of revolving credit

Redemption of revolving credit

Now, more than half of revolving loans are taken out in banks, which limits the “marketing” effect of such an offer taken out in stores. Indeed, it will be easier to compare offers without rushing through a bank branch than in a store.

In addition, if the borrower has several credits (consumption, including revolving or real estate credit), it is possible to combine them in the context of a loan buyout. This banking operation allows to settle all the credits in progress, to create a new financing plan with a unique monthly payment associated with a better rate. In return, the duration is rescheduled. This operation makes it possible to reduce the debt ratio and to envisage a new project by integrating an amount integrated into the repurchase of credit.

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