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When is the best time of year to get my loan?

Every tough guy knows: nothing better than taking advantage of New Year’s Eve sales, right after Christmas. Or buy chocolate eggs only after Easter Sunday has passed. In fact, experience teaches us that when the goal is to save money, there is a right time for everything. As proof, just think of that friend who always enjoys promotions when traveling outside of school holidays. But when it comes to credit, have you ever wondered when is the best time of year to get your loan

As with all other aspects of life, here at Astro Finance we believe there is a perfect time to commit to loan repayments. However, it has much more to do with your planning than specific dates, as we will see below. Know what to consider when deciding!

After all, is there a date when interest rates are most advantageous?

interest loans

As a general rule, price changes occur according to the law of supply and demand. That is: the more people interested in a product or service, the more expensive it tends to become. That’s why going to the beach on a long summer holiday is often much more expensive than going on the same trip on an ordinary spring weekend. Similarly, the price of drinks goes up during Carnival and so on.

In the case of loans, although it is common to hear about loans at certain times – such as at the beginning of the year for tax payments – they are required all year round. But not only that! In fact, interest rates are calculated based on several other factors. These include the loan repayment term and the risk of default, which changes not only from customer to customer. And also according to the moment of each one. For example, applying for a credit when your credit score is high is more advantageous than applying for the same loan when it is negative.

Answering the question, there is no specific date of the year when interest rates are most advantageous. The best time to apply for credit is one that conforms to your planning and current financial situation.

Tips for finding your best moment

money loan

To say that there is no period of the year when rates are most advantageous is different from saying that there is no ideal time to apply for a loan. In this sense, of course, nothing prevents you from doing a simulation at your leisure. However, in order to get the most out of credit as well as to ensure timely repayment of payments, we have separated some situations in which the loan becomes really advantageous.

What is the best time of year to get my loan? When you know exactly what to do with money

In general, when we apply for a loan it is because we have a goal in mind. How to get out of overdraft, clear your name, make a home makeover, pay for school or travel with your family on vacation. But before applying for credit, it is important to do the math and ask yourself how much exactly you need and how (and when) you will apply that money. Otherwise, you risk insufficient money to get your plans off the ground. Or the other way around: you pay interest for nothing for money you didn’t need right now.

What is the best time of year to get my loan? When you plan to pay installments

money loan

Thinking of the tip above, the best time to get a loan is when you need and know what to do with it. But it is not in use using credit to clear your name and then wind up with the bills again, delaying the payment of installments. So if you think the loan may be the answer to your problems, the first step is to define how much you need.

Then set up a financial control worksheet, see how much money you have left each month, and ask yourself how long you are likely to continue with the same expenses and expenses. Are you in a stable situation and there are no big expenses ahead or will you be able to afford them smoothly? In this case, the amount of installment should be less than the balance in your account. Remembering that you can always use the spreadsheet to find out where you can save.

When is the best time of year to get my loan? When you have already compared several loan offers

money loan

Let’s say you already know what you want to do with the money, have done some financial planning and found a loan with installments that fit right into your pocket. No doubt, this is the best time to close your loan, right?

This can be as long as you have researched it before and make sure it is the most beneficial option in terms of time and CET. After all, as much as the monthly fee fits your budget, it is very bad to pay more for something that could have been cheaper. Therefore, research long before closing a proposal.

Enjoy you are here at Astro Finance and use our platform to get a simulation and receive up to 10 pre-approved credit offers! With a little research and planning, you can make your dreams come true or get out of debt.

Credit repurchase: the gift vs money problems.

Who are you, the generous donor? The Good Finance Group, this organization created by major associations and social and humanitarian foundations with the aim of preserving and developing a relationship of trust with their donors, is trying to paint a robot portrait of these French people who carry out donations. And guess what: trust is important.

Almost one in two French people donates each year

Almost one in two French people donates each year

For more than six out of ten respondents (62%), it is the lack of confidence in the use of funds that encourages them not to donate to an association or a foundation. This is the major teaching of the Good Finance Group 2019 edition. Confidence therefore takes precedence over the lack of money (57%) and the feeling of already contributing through taxes (36%). Almost half of French people declare themselves donors (44%): the addition of regular donors (20%) and occasional donors (24%). But who are they?

CSP- give the least

CSP- give the least

The most regular donors are mainly people aged 65 and over, from CSP +. They consider themselves very privileged, committed and united, and they trust associations and foundations. Among casuals, very present among 18-34 year olds, the feeling of anxiety is more present and confidence is not blind.

The “non-donors” are mainly CSPs – animated by a feeling of revolt, who display the feeling of being part of a minority a total lack of confidence in the institutions. A third of those questioned doubt that the money raised really serves the cause, and three in ten believe that there are too many scams, embezzlement or uses for personal gain.

Tight budget doesn’t help

Tight budget doesn

If trust is the driving force behind donors, the lack of money remains a blocking point for an entire population. For many French people, it is the repayment of debts which is the priority, with the threat of over- indebtedness which hovers when one is engaged on several loans.

A family who wishes to become an owner and where the two spouses purchase their vehicle often has to take out several loans: a mortgage, a car loan, to which can be added another consumer loan to deal with an unexpected bill. or when changing household appliances.

For these households whose remaining living is limited, the repurchase of credit can help to find a room for maneuver in the daily budget. By extending the duration of credit, the grouping of loans makes it possible to reduce the amounts paid each month for their repayment, and thus reduce the anxiety of the bank overdraft.

Credits: what is the profile of people in debt situation?

In its survey of people in over-indebtedness, the Best Bank presents a portrait of people who have filed a file .

In 2016, they are less numerous since their number decreased by 10.6% over one year. Find the detail in our article.

Who are the people affected by over-indebtedness?

Who are the people affected by over-indebtedness?

Mostly, “over-indebtedness situations concern single people , without any capacity to repay in more than one out of two cases”, according to the bank.

Who are they ?

  • Widowers, single, separated or divorced represent 66.1% of the files. The average age observed is between 45 and 54 years for 26.8% of cases.

  • Tenants are the most affected by over-indebtedness with a high share of 76.3%. Conversely, owners were 8.3% in 2016, a figure up compared to 2011 since they were 6.1%.

  • The average amount of debt was 27,481 USD in 2016 , a decrease of 1,024 USD compared to 2011 (excluding mortgage).

  • They are mainly employed (33.9%) or manual workers (23.6%).

  • 28.7% are unemployed, up from 2011 (25.6%).

  • 1 in 2 (52.1%) does not have the capacity to repay debts at all.

“Furthermore, it appears that 51.1% of over-indebted households have resources strictly below the minimum wage and 14% of them (10.6% in 2011) have resources below the RSA for two people. “

Credit consolidation to reduce the debt ratio

Credit consolidation to reduce the debt ratio

The restructuring of debts or the repurchase of credits makes it possible to reduce the household debt ratio linked to the accumulation of loans. The repurchase of credit can take various forms: the repurchase of consumer credits or the repurchase of mortgage credit , that is to say with a mortgage.

When the debt ratio is too high (property debt, excessively high charges, consumer credits, etc.), the loan repurchase makes it possible to group all the loans into one in order to reduce the debt ratio . The borrower has only one rate and only one monthly payment to pay.

Mortgage: a very dynamic first half for the market

+ 10%! Yes, the number of projects financed by increased by 10% in the first half of 2017 compared to that of 2016. If this figure implies that the real estate market is doing well, it remains to qualify. 

Rising property prices penalize borrowers

Rising property prices penalize borrowers

Recently, in our study on real estate purchasing power we revealed that real estate prices had increased significantly in most French cities. It turns out that this price inflation is responsible for over 70% of the increase in monthly payments by borrowers in 6 of the 11 largest cities in France .

If borrowing rates have made it possible for the past 3 years to boost the real estate market due to their significant drops (particularly during 2016), this leverage is starting to run out of steam. Indeed, credit rates, although still very low, have increased since the start of the year.

So yes, the first half of 2017 was dynamic ; however, transactions should decrease slightly in the short term , between – 2% and – 5% in the second half.

What prospects for the second semester?

What prospects for the second semester?

Recall that 2016 was an exceptional year for the real estate market: relatively stable prices and historic drops in lending rates boosted sales . More borrowers have access to property.

In fact, comparing 2017 to 2016 is not an easy task and may seem unfavorable. Moreover, if last summer had presented record figures , this summer should rather be “normal” for the market. Whether it be from a demand or a credit rate perspective, the summer season is usually a standstill period .

As for back to school ? The question is whether or not banks will have reached their objectives by the end of the summer and therefore will be inclined or not to lower (or if not, increase) their interest rate scales . In addition, the latest regulations impacting bank margins should also play in the balance.

What about loan renegotiations?

What about loan renegotiations?

Mortgage renegotiations represented a significant share of market transactions , especially in recent months thanks to record real estate rates . The activity is starting to run out of steam. Indeed, the volume of renegotiation intentions is in sharp decline and returns to levels known before the second quarter of 2014. The volume of intention was 38% in September 2016, when it is only 11 % in May 2017.

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Holiday credit rates: the lull is in sight!

 

The month of June was synonymous with increases, temperature certainly, but also mortgage rates. A trend which should however subside with the summer holidays.

Regular scale readjustments

Regular scale readjustments

Banks are in the habit of changing their credit rate scales at the end or at the beginning of the month. But change of rule this time with readjustments once, or even twice a month depending on the banking organization. Only one establishment maintained its June scales for the month of July.

What about rates?

What about rates?

We note for the average rates increases of:
– 5 cents over 7 and 10 years,
– 15 cents over 15 and 20 years,
– 20 cents over 25 years,
– 10 cents over 30 years.

Despite these increases, ” credit rates remain very attractive, ” says Chris Banjo, Director of Communication and Borrowing Studies. Banks thus offer an average of 2.25% over 15 years, 2.55% over 20 years and 3.20% over 25 years.

What changes in rates for this summer?

What changes in rates for this summer?

Summer vacations require, rates should freeze. Unless, of course, if conclusions concerning Greece affect the OAT, the rate at which banks borrow. An increase in the latter would then directly impact lending rates to individuals.

Aside from this scenario, it is only at the start of the school year that changes should be implemented. Developments that are difficult to predict : despite the upward movement, the banks could still grant reductions either to catch up with their commercial targets for the most behind or to prepare for 2016 for the others.

Banks will, of course, always be very dynamic in terms of mortgage loans. It is an essential tool for attracting new customers.

Increasingly selective banks?

Increasingly selective banks?

Banks apply a policy of rate hikes but also of increased selectivity. The influx of applications in recent months has indeed pushed them to tighten their criteria, in particular by applying specific scales according to customer profiles.

In this context, having recourse to a broker allows you to optimize your file and thus to increase your chances of obtaining a loan. In addition to income, selectivity is based on age, the development perspective or the profitability of the relationship.

“We must not forget that the borrower can also choose his bank! So don’t forget to negotiate the rate offered by your bank while looking for more attractive competitive offers.

Take advantage of our expertise at the best rate, it’s easy and free! from 0.66 % * over 15 years

 

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The installment loan – extremely popular, especially as online installment loans

An installment loan is a loan granted by a bank or credit institution to private individuals. The loan amounts to a predetermined amount that is repaid in fixed monthly installments. The installments include an amount that serves to repay the loan and a certain rate of interest that is also recorded when the contract is concluded. Depending on the contract, fees may also apply, which the bank may charge in addition to the interest. It is common to offer an installment loan for loans with amounts between 500 and around 75,000 dollars. The terms are very variable and can be between 12 and even 120 months.

An installment loan is often referred to as a consumer loan or a purchase loan because it is usually about making a specific purchase for which the total amount is not available at once. Many credit institutions name their offers for installment loans according to the goods to be financed, for example there are car loans, furniture loans and loans for electrical appliances. In Austria, the terms counter credit and term loan are also used, whereby all of these terms refer to installment loans.

Installment loan – a popular banking product

Installment loan - a popular banking product

Installment loans have been in Germany for more than 60 years. Today, virtually all banks and credit institutions offer installment loans, with auto banks specializing in vehicle finance. The consumer credit law regulated the granting of installment loans to private individuals until 2002. The law on modernization of debt law has been in force since 2002. In the past few years, installment loans between 130 and 140 billion dollars have been granted annually in Germany. The tendency is increasing. Installment loans are one of the most common forms of credit and are usually given in the form of a blank loan. This means that the borrower does not have to provide collateral. Proof of salary or wages is usually sufficient to apply for an installment loan. Banks are only required to provide guarantees if the borrower’s creditworthiness cannot be adequately proven. When financing vehicles via a so-called car loan, the financed vehicle is usually accepted as security. But many institutes today also do without this security transfer, because that makes the financing procedures easier and easier.

Installment loan procedures and procedures

Installment loan procedures and procedures

An installment loan is repaid in installments that are paid monthly and are always the same amount. These installments always include a redemption portion and an interest portion. The interest for an installment loan is slightly higher than the interest for a construction loan, for example. However, installment loans are usually cheaper than overdrafts. Many institutes charge processing fees between 2 and 3.5 percent, which are, however, to be paid once. Some of these processing fees are still being discussed in court and have already been found invalid and unlawful in several cases. However, a final decision from the Federal Court of Justice is still pending because all revision proceedings have so far been withdrawn by the banks, probably for fear of the result. It is often required that residual debt insurance is taken out in addition to the installment loan, which creates additional costs for the borrower.

Interest on the installment loan

Interest on the installment loan

The amount of interest depends heavily on the creditworthiness of the respective customer and is usually defined very individually. Various direct banks offer cheaper interest rates than branch banks do, but the branch banks are catching up here and simplifying their procedures to such an extent that they too can keep up with the offers of the direct banks. Each contract of an installment loan must include the effective interest rate so that the customer can see the real loan costs. Interest rates also vary widely depending on how long the loan is for. If you pay the money back faster, you pay less interest. Various installment loans end up costing up to 30% more than the actual amount. In some cases, however, it can be advantageous for the customer to pay only very small amounts over a very long period.

Regulations and laws on installment credit

An installment loan is usually reported to Credit Bureau. An installment loan can be canceled by the borrower after a period of six months has expired. Then a three-month notice period will take effect. Prepayment penalties are not due. However, the bank does not have to reimburse the processing fee and may also charge a termination fee. However, this must not be arbitrary and must be specified in the contract. Since mid-2010 there has been a new EU directive dealing with installment loans. It states that all borrowers can terminate and repay their loan contracts without giving notice.

However, the EU directive grants the right to a prepayment penalty. The amount of this compensation is limited to a maximum of one percent for contracts that have a term of more than 12 months and half a percent for contracts that have less than 12 months remaining. Of course, the bank also has the right to terminate the loan agreement. However, this only if the borrower has not paid at least two successive installments, or has paid it only in part or with delay, and if at least ten percent of the total amount is outstanding at the same time. For contracts that run for more than three years, this limit is set at five percent. The bank must also have sent a third reminder with the threat of termination and must adhere to a two-week period. The fact that banks charge fees for changes in the loan agreement is common. Depending on what is stated in the contract, special payments are permitted or only possible for a fee. Some banks allow changes to be made free of charge.

The customer should check his contract carefully in advance. In addition to the EU regulation, the German Civil Code BGB regulates the granting of installment loans to private individuals in Germany. General rules can be found in Article 488. Article 489 provides information on termination and Article 495 deals with the fact of the opposition. A loan contract for an installment loan must always be in writing.

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Joint credits: what happens in the event of a divorce?

In the event of a divorce, one of the issues to be resolved is the division of property and credits contracted by the couple. How to do it and what solutions are available to you? The loan problem comes into play and can sometimes require a grouping of credits to accompany the new situation of two ex-spouses.

Take inventory of active and passive assets

Take inventory of active and passive assets

The first step is to draw up an exhaustive inventory of the heritage common to the couple. Movable goods, real estate, credits, debts…. Everything should be listed, listed and communicated to your lawyer. If you are married under the “separation of property” regime, so-called undivided property, that is to say property acquired jointly, is also concerned by partition.

Which credits are affected?

Which credits are affected?

The credits that can be shared are called “household debts” that is to say that they were either contracted during the marriage or that they were used to finance the life of the household (furniture, children’s studies, car, etc.). Personal loan, revolving loan, bank overdraft all these credits are to be taken into account. If a mortgage has been contracted, it will depend on the fate reserved for the property. If it is sold, the immo credit can be reimbursed and the excess distributed between the two spouses, if one of the two keeps the property, it will take sole responsibility for the repayment of the installments.

Share credits

Share credits

During a divorce by mutual consent, it is possible to agree on a distribution of credits. There are two solutions for this: either distribute the credits and each will take care of one or more credits after the divorce alone, or pursue a common and fair repayment according to each person’s income. All this must be clearly indicated in the Divorce Agreement.

Pay attention to the principle of solidarity

Pay attention to the principle of solidarity

The principle of solidarity between spouses is very simple: when one of the two spouses contracts a credit or a debt, the other spouse is automatically united. In other words, each must repay the credits and debts contracted by the other in the event that the one who contracted the debt can no longer repay it. This principle is also valid even if the Divorce Agreement grants this or that credit to one of the spouses. If you wish to disengage from a loan, the solution may be to repay it in full in advance.

If your means allow you of course! The other solution to reduce your debt ratio is to buy back credit to group your different loans into one : this allows you to combine the monthly payments into one, and especially to reduce the amount for not be taken by the throat in his daily budget. The repurchase of credit smoothes the amount to be reimbursed over time to allow to benefit from a breathing.

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How is your Credit Score (FICO®) formulated?

Your credit report contains different types of information that is used to calculate your credit score. No one knows exactly how your credit worthiness is calculated but the Fair Isaac Corporation (FICO ® ) page gives a very good idea. This graph reflects how important each of the categories that affect your score is.

The most important is your payment history (Payment History)

payment history

35 percent of your score is calculated according to how you have fulfilled your obligations in the past. This takes into account what type of debts you have, how long the account has been unpaid, how many accounts are in a state of crime or in collection and the number of accounts that are being paid as agreed. This is the part of your score that is very difficult to change if it is in poor condition because if you missed a payment on your card, it will continue to affect you for several years. That is why it is very important to fulfill all your payments without fail.

Amount you owe (Amounts owed)

Amount you owe (Amounts owed)

Another 30 percent has to do with the amount you owe in respect to the amount of credit you have. Here you will consider how many obligations you have and really how much money you have to meet your future obligations. The most important factor, and which you have a little more control is the ratio between the credit limit to the amount you owe (debt to limit ratio). This is a very easy formula where you divide the balance of all your accounts among the total limit of them. To have a good score in this category it is always recommended that you do not owe more than 30% of your limit.

Age of your credit history (Length of Credit History)

15 percent of your score is affected by the time you have establishing credit. This factor is important to take into account when you want to open a new credit. Each time you establish a new credit this percent will be reduced. That is why it is very important that you do not accept credit cards just because they offer it to you in a store or by mail; Just have the cards you really need and keep them in good condition for a long time.

New Credit

Another 10 percent is directly affected by accounts that have recently opened. This also takes into account the times that a company or bank reviews your credit report when you apply for the credit. It is advisable not to have more than 7 credit reviews in a period of two years. Make sure you only apply for cards that you really need, if not, this will also affect your score.

Types of credit used

Essentially there are two types of credits that you can use: The lines of credit which are the accounts that when you finish paying the balance you can use it again, like a credit card; and bank loans, which you have a fixed amount to pay every month and when you finish paying it you don’t have access to those funds, such as a mortgage or a car loan. It is important not to have many accounts of one or the other but a mixture of the two.

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Credit vs. Banks: Which is Best?

cash

Since the financial crisis in 2008, many consumers feel a traditional large bank can no longer be the best place to keep their money. Credit unions are an alternative solution, with over 6,000 available in the United States.

Most Americans still belong to one of the major banking companies such as Good Finance & Company (NYSE: WFC) or Bank of America (NYSE: BAC). However, this trend is changing rapidly; According to the Credit Union National Association, over 3.7 million people joined a credit union in 2015.

The layout of this manual reflects that structure

bnk

A big difference between a bank and a credit union is the business structure. The major banks, such as Good Finance or JPMorgan Chase & Company (NYSE: JPM), are some of the largest companies in the world and are staples of the financial sector. The banks have incredible reach, with thousands of branch sites across the country. For example, Good Finance has over 8800 offices and 13,000 ATMs across the country.

Credit boxes are considerably smaller in size and are designed to serve a particular region or city. For example, the Navy Federal Credit Union (NFCU) has only 300 branches, with many near military bases. But just because most credit companies have smaller branches doesn’t mean they can’t have a similar range as the big banks. Many credit unions connect a network that aims to extend the scope of credit union ATMs. Navy Federal Credit Union members have access to over 52,000 ATMs across the country, over four times as many Good Finance ATMs.

The banks are in the business sector making profits for their shareholders

bank

shareholders’ voting rights are based on how many shares; Therefore, the largest shareholders have the most power.

Credit unions are nonprofit units and customers are considered members. A member’s voting ability is not based on how much money is deposited. Each member receives an equal vote, which can directly influence the management of the credit union. Some credit companies are also very specific about who can apply for membership. NFCU is only available to active and veteran military personnel and their families.

Due to the larger size of deposits, a bank is governed by several federal agencies such as the Federal Reserve and the Office of the Comptroller of the currency. The banks are also required to have a certain amount of capital reserve requirements, determined by the Basel Committee.

Credit unions are governed by the National Credit Union Administration (NCUA) at federal level and government agencies at state level.

When comparing the two structures, most consumers are under the impression that credit unions cannot serve the public as a bank. The banks have more places, which is good for customers who want to in-service staff by visiting some branch site in the country. Credit companies have considerably fewer places than most banks, but branches are in close proximity to most members. Some credit companies have also responded to the large banks’ reach by creating a network of ATMs. However, not all Credit Union members are in a larger ATM network.

Offers and features

bank

Banks and credit institutions offer basic control and savings accounts to customers. Both also offer customers the typical checkbook, bank card and other basic banking functions such as internet banking and bill payment. But smaller credit companies usually do not have the same technology budget as a bank, so the website and security features are much less advanced.

Banks offer their customers a wide range of credit card options. Bank of America has 21 different credit card options, ranging from rewards cards to student cards. The BankAmericard Cash Rewards card gives users a $ 100 online cash rewards bonus offer as well as 1% cash back on purchases, 2% at grocery stores and 3% at gas stations.

Credit companies can also offer credit cards but have less availability. NFCU is the largest credit union of assets in the country and only offers six different credit cards to its members. The second largest credit union is state-owned “credit union (SECU) and offers only one credit card.

Banks offer many other financial services to members, such as mortgages, bank certificates (CDs), insurance, wealth management and investing. Good Finance provides home, student, auto, home equity and personal loans. The company also offers various insurance branches, such as life, auto, home and umbrella insurance. Customers can open a broker or retirement account through their online WellsTrade brokers or full service Good Finance Advisors.

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Assignment of claims – how does it work?

Long-lasting debts are a problem not only for the consumer, who brings debt collectors and the risk of bailiff enforcement. It is also a big trouble for a creditor who may be in financial trouble for some debts. However, the debt may change the “owner”. To do this in the majesty of the law, the law provides for something called assignment of claims. What exactly is it and how to write an application?

Arrears on the payment of financial receivables may arise in various circumstances, sectors and industries. Debts may arise due to non-payment of e.g. rent, payday loans, loans or bank loans. The same can be called not paying fines, subscription fees or invoices. Although we regularly hear about the consequences of non-payment of obligations from various media, for warning and caution, problems with arrears to creditors are still commonplace.

There is a lot of talk about the negative effects of non-payment from a consumer perspective. Rightly – many people are unaware of the scale of the consequences that may result from defaulting on debt. This often brings deplorable results, such as contact with debt collectors, prompts or urgent calls. There is also a situation that surprised debtors are quickly embraced by bailiff’s actions, whose intervention is usually asked by impatient creditors. Non-payment of obligations is not only a problem for the debtor, but above all – the creditor’s trouble.

Arrears are a big problem for many creditors

Arrears are a big problem for many creditors

A counterparty who fails to comply with the obligation set out in the relevant contract for timely repayment of the debt in a specified installment or in full, exposes him to financial losses. While in the case of large loan companies or banks, it is a drop in the sea, entrepreneurs (especially the smaller ones) may be seriously affected by one-off problems with obtaining the financial resources due, e.g. from an invoice. Instead of focusing on the day-to-day operations, the creditor must make provision for action to remind the debtor of the debt.

This also involves costs associated with sending letters, phone calls, hiring a debt collector, etc. Fact, art. 10 of the Act on payment deadlines in commercial transactions 1, the creditor may charge the debtor with the costs of recovery in the amount of the current equivalent of EUR 40 (from the last business day of the previous month). These costs are added to the flat-rate debt. Many creditors also specify in so-called default interest, which is also intended to compensate for the costs and time spent claiming reimbursement.

However, many creditors simply do not have time to do so. There are also concerns about how protracted and time-consuming the recovery of funds may be. In such a situation, the creditor is not without a way out. The solution we further characterize is at the heart of today’s guide.

Assignment of receivables – what is it?

Assignment of receivables - what is it?

Under this rather mysterious sounding wording lies the name of the procedure, which consists in selling the debt to a third party. The word “assignment” is derived from the Latin expression “cessio”, which can be translated as a yield. If the creditor is not interested in any further or any other investigation regarding the acquisition of funds due, he may enter into a debt resale contract with a third party. For the amount agreed on both sides, he sells not only the debt but also the rights to these funds.

As the provisions of art. 509 of the Civil Code 2, the creditor has the right without the knowledge of the debtor to transfer the debt and the right to redress without the knowledge of the consumer, unless otherwise provided in the previous contract. In the case of the aforementioned contract for the sale of debt rights, there are two parties. The existing creditor is referred to as assignor. In turn, the person who becomes the new owner of the rights to dispose of the debt is an assignee.

At the time of signing the assignment agreement, the creditor should be aware of the total loss of rights to continue to dispose of the debt. For the agreed amount of sale, he is no longer a creditor and cannot claim the resale of the resold debt or part of it covered by the arrangements.

When can the assignment of receivables be carried out?

When can the assignment of receivables be carried out?

Any creditor who intends to assign his claim should consider some important aspects at the beginning.

  • Debt disposal method.
    Assignment of receivables may cover both the entire debt and only a specific part of it. It is worth assessing at the beginning whether you want to sell a completely specific claim or only part of it.
  • Contents of the contract of commitment that has become debt.
    As mentioned earlier, the assignment of receivables can only be carried out in a situation where an earlier agreement, e.g. a transaction or private loan, has not ruled out. Assignment is no longer possible if the contract stipulates, for example, a ban on changing the creditor in the event of a possible debt.

Which debts can be sold?

Which debts can be sold?

An interested third party, e.g. another entrepreneur or business entity, can be sold virtually any type of debt. If the law does not say otherwise or if the contract originally concluded between the creditor and the consumer does not exclude it, the law gives a lot of freedom. It is worth remembering that in the case of debt, e.g. a mortgage, the creditor may also sell a mortgage related to the debt. We are talking here about, for example, a situation when the original debt was incurred for a house. The creditor can sell the whole “package”, at the same time – not being able to separate it, eg by selling only a mortgage. Art. 79 of the Act on Land and Mortgage Registers and Mortgage 3.

It’s still not everything. The Civil Code allows 4 what we call the assignment of future claims. The creditor may sell to someone an obligation that arises in the future and there are documented grounds for doing so. Therefore, it may not exist at the time when the assignment of receivables is concluded, but some legal basis is required.

Assignment of receivables and the nature of the debtor

Assignment of receivables and the nature of the debtor

It is also worth characterizing how the debtor should be treated in completing the formalities related to the assignment of claims. Although the contract, which we characterize below, is intertwined with the debtor every now and then, he is not a party to the contract. It cannot therefore affect the arrangements, not to mention the fact that the law does not impose an obligation to inform him that an assignment is taking place at all. The debtor is therefore in a very uncomfortable situation here. It is up to the creditor’s good will and what he has agreed with the person taking over the debt whether he finds out about the whole situation.

What must the assignment agreement contain?

Although it is not legally required, we recommend that you draw up an assignment agreement in writing. This will not only clearly specify all the details that are the subject of the agreement. It will also document all provisions. In this way, both what the disposing claim has agreed to and the one who will now have it will be concluded in writing. It secures the interests of both parties. You can never be sure if there will be any misunderstandings in the future. The agreement should resolve such conflicts quickly.

To this end, it is worth completing it taking into account the following guidelines. Often misunderstandings arise, so it should be sufficiently legible and precise. The information provided should be completed in the presence of both parties to the contract, consulting all subsequent parameters on an ongoing basis. Here they are.

  1. In the first place, the contract must include the title, or simply – the assignment of receivables.
  2. It should specify which claim the arrangements relate to and what part of it – selected or total.
  3. It is also necessary to characterize the current value of the debt. Specify the amount to be paid by the debtor and the additional costs resulting from the delay (e.g. interest).
  4. The template should be enriched with a claim basis, e.g. a loan agreement, invoice, etc.
  5. Provide the debtor’s personal details.
  6. Although not legally required, it is worth informing the debtor that the creditor will now be someone else. We encourage you to determine in writing which page will deal with this.
  7. It is also necessary to clarify how the claim is regulated. It can be a bank transfer. Let’s not forget to specify the final repayment date.
  8. There can also be details of the disposing receivable and the one who assumes it.
  9. The date and place of the contract must be provided.
  10. The document should have a legible signature of both sides.

Assignment agreement – a specimen

Assignment agreement - a specimen

Knowing the most important information about what should be included in the contract documenting the assignment of receivables, it’s time to present a free template. It is ready to download and complete in an electronic version. You can also print it by entering the data manually.

If not the assignment of receivables, then fiduciary assignment or debt exchange

If not the assignment of receivables, then fiduciary assignment or debt exchange

In addition to the classic assignment of receivables, there is also another type of transaction related to a given debt. The existing creditor with a third party may also enter into a so-called fiduciary assignment. This is a temporary transfer of someone’s rights to enforce receivables, without disposing of the rights to funds from debt. For a mutually agreed fee, someone decides to take action to return the debt, and then passes it on to the original creditor. That is how debt collectors can do. It’s a solution that can work in case of serious difficulties with refunds.

An alternative solution for people who do not want to use any of the available variants of assignment at all may be the so-called debt exchange. It is a convenient way available on the internet today, for selling debt, offering to buy in public places. There is a lot of competition in this sector, allowing consumers to choose from many different exchanges offering debt trading.