Debt consolidation
An operation that merges several existing loans, mortgage, consumer, revolving, into a single loan with one installment, usually lengthened to ease the budget. It lowers the monthly debt ratio, most often at the price of a higher total cost. Debt diagnosis and hidden-debt detection are decisive here.
Key points
- Merges several loans (mortgage, consumer, revolving) into a single reduced monthly payment.
- Extends the repayment term, which generally increases the total cost of the operation.
- Bank statement analysis is essential to detect undeclared debts.
- A poorly prepared file can conceal financial fragility and expose the broker to liability.
Frequently asked questions
How do you explain to a client that debt consolidation may cost more in total?
By showing a side-by-side comparison: current loans (remaining total cost, term) versus the new single loan (same amount, extended term). A longer term generates more interest even if the rate is lower; the benefit is the lower monthly payment, not an overall saving.
Why is hidden-debt detection critical in this type of file?
A financially stressed borrower may omit, intentionally or not, revolving credit or structural overdrafts. If these debts re-emerge after consolidation, the debt ratio jumps immediately and the financial situation worsens. Thorough analysis of at least three months of bank statements is the broker's first line of defense.
What is the difference between a secured and unsecured debt consolidation?
When consolidation includes a mortgage, it takes a mortgage charge or surety over the property, which lowers the rate but pledges assets in case of default. Without real estate in the pool, the operation stays within consumer credit rules, with shorter terms and lower ceilings.
In practice
A borrower with a mortgage at €900/month, two consumer loans at €300/month and a revolving credit at €120/month, €1,320 in total, can consolidate everything into a single loan at €750/month, freeing €570 of monthly budget, but extending the term by seven years and increasing the total cost by around €15,000.
Put it into practice with CourtImmo
See how CourtImmo software helps brokers on this topic:
Official sources
- Credit consolidation (art. L314-10 to L314-14) · Légifrance — Code de la consommation
- Renegotiate or refinance a mortgage · Service-Public.gouv.fr
- Obtaining a mortgage loan · Service-Public.gouv.fr