Insurance when loaning or redeeming loan is not mandatory, however it is strongly recommended. Here are some points of clarification.
Insurance for a purchase of loans
Consolidation of loans allows several debts to be collected in one, therefore the insurance of each loan will be removed and replaced by one. That said, the law does not require compulsory insurance to guarantee the purchase of loans in the event of loss of employment, disability, sickness or death.
The question to ask is: should you buy insurance for a loan redemption ? As a borrower, this represents an additional cost on the monthly payment. As a professional, the non-presence of this guarantee may compromise the agreement of the file.
Banks and loan institutions only grant the refinancing if the borrower has insurance to cover a possible illness or accident at work. It is therefore not mandatory but essential to obtain the reorganization of its loans.
Delegation of insurance: reduce the cost
It is important to note that a borrower can fully purchase insurance from another organization than the one that consolidates its loans . This is commonly known as insurance delegation.
For example, a borrower obtains from a banking intermediary the redemption of his loans . It can do anything to ask to take insurance (with the same guarantees) at a more attractive rate at another establishment that under its partnerships has more competitive products . The household can negotiate the cost of their insurance and reduce the amount of their monthly payment as much as possible .
Other costs to reduce on the purchase of loans?
Insurance is a significant part of the cost of pooling loans . But if we assume that we can negotiate the price of insurance, are there other points to negotiate to minimize the amount of the monthly payment?
The other key elements that make up the redevelopment of loans are the rate, the term and the loan institution . The rate is difficult to negotiate, it is then necessary to compete with a bank and an intermediary to be able to compare in good conditions. The other point is the duration, the shorter it is, the less the loan will be expensive , this implies having a relatively high repayment capacity.
Finally, the institution often takes intermediation fees or fees . It is obliged by law to communicate on this percentage, take care to ask your establishment to communicate them to you.