Modular Loan – Flexible Credits

In a real estate loan, the flexible option allows the borrower to readjust his repayment expenses to his finances or projects. Is this option compatible with credit consolidation?

What is a flexible credit?

A flexible credit is generally fixed rate, it is an option that gives the possibility to control its reimbursement expenses. This option allows the borrower to take advantage of the modularity of the amount of its maturities. In other words, it can be used to lower or increase the amount of its monthly payments according to the evolution of its income, its projects or its sudden expenses. The flexible option concerns real estate and consumer loans. However, banks and banking institutions offer this possibility within a reasonable limit that can range from 5% to 50% of the initial amount of the monthly payment. Generally, its implementation does not require a new study of real estate financing, lenders often provide a modulation on request of the borrower. However, it may be capped in the event of a sharp increase or decrease in the initial amount of maturities.

Why a flexible credit?

Given the socio-economic situation characterized by rising unemployment and job insecurity, the modulation option has become unavoidable in order to calmly repay its funding. On the cost of the loan, modulation is very important. By increasing the amount of its maturities, the repayment period is shortened, which makes it possible to optimize the cost of financing. In the event of a decline, the duration is extended, increasing the cost of financing. In all cases, the modulation must be considered, because the cost of a loan lies mainly in the duration and not only in its interest rate. Moreover, in most cases, lenders do not apply fees to the modulation of monthly payments. Some even offer it on each anniversary date of the loan. Namely that some modulations allow to postpone from 3 up to 12 monthly payments throughout the repayment period.

Can a Flexible Loan Be Repurchased?

The modulation of outstandings is an option that allows to review the repayment plan of its financing. It is a credit whose borrowing rate remains fixed, but the maturities are variable. This option is more and more recommended because it offers great flexibility in terms of repayment in case of difficulties or unforeseen events. However, modulation is of little use in some cases:

  • The borrower has several outstanding loans;
  • The interest rates of its outstandings are too high;
  • Insufficient modulation ceiling

In this case the borrower can opt for credit consolidation. A flexible loan, whether real estate or consumption, can be the subject of a loan consolidation subject to eligibility of the borrower. In addition, the new loan that prepay the initial outstandings can also be flexible. Thus credit modulation is fully compatible with loan consolidation.