When we talk about rates, we mainly think of interest rates. With the current environment, it is very likely that you have heard of the historically low level of borrowing rates. But what does the wear rate have to do with them? Find out how these two indices are linked!
What is the wear rate?
The usury rate is the maximum interest rate at which your bank can grant you a loan. It is defined by the bank according to the characteristics of each financing.
As part of your loan repurchase, it is possible that the presence of a mortgage can vary the rate of wear. In fact, if a mortgage is part of the credits bought back, the share it occupies in the redemption amount changes the rate of wear and tear obtained. There are also usury rates adapted to each type of loan repurchase, depending in particular on:
- the nature of the interest rate on the loan granted (fixed or variable),
- the nature of the loan granted (classic or bridge).
In early May, we showed you these differences during our analysis of wear rates in the 1st quarter of 2016.
Why should you care?
This is a good benchmark for knowing whether making a loan buy-back is more or less appropriate at a particular time of the year. Be careful, however, not to consider rates as the only decision criterion: buying back your credits must be a response to a clearly identified need.
So, if you have increasing repayment difficulties, do not wait until the next quarter to redeem your credits! Mainly for two reasons:
- your financial situation may have worsened by then,
- wear rates for the next quarter may have increased.
When your budget stability and your quality of life are at stake, it is risky to seek the best rate at all costs. The repurchase of loans brings immediate relief with a monthly drop of $ 530 on average. Do not hesitate to ask an online broker for this operation: he is the specialist and will find for you the most advantageous offer.
Average decrease obtained on credit consolidation files validated over the whole of 2015. In the case of credit consolidation, when the transaction results in a reduction in the amount of monthly payments, this may result an extension of the credit repayment period or increase its total cost. The reduction depends on the remaining term of the loans purchased.