Managing personal finances is not an easy exercise. Between the necessary daily expenses, leisure and others, it is easy to find yourself in a complicated financial situation. We are going to evoke here the story of Monsieur and Madame Plaisirsdelavie , a couple of young lovers. Once upon a time…
The Plaisirsdelavie family is a family like there are many. Mr and Mrs Plaisirsdelavie met during their studies and have not left each other since that time. Life goes on its way.
Madam now wants a beautiful and grand marriage. As Monsieur must finish paying for his studies in business school ( another 4 years of credit ), they have not yet had the opportunity to build up a small savings (and thus benefit from the magic of compound interest). They therefore decide to take out consumer credit to finance this wedding, as well as the honeymoon they intend to afford. The wedding is a great success, both for the newlyweds and for the guests, delighted by the ceremony and the enchanting setting. The amount borrowed for this magnificent wedding and the trip to the Seychelles is €8,000, amount borrowed over 5 years, or €170 per month . But our young lovebirds find that they earn a decent living (€3,100 between them), and what’s the point of having followed long studies and working every day if not to enjoy the joys that life offers ?
6 months have passed, Mr. and Mrs. Plaisirsdelavie are still very happy. They are all the more so because they are waiting for a happy event. You have to prepare for the arrival of the future young lady: decorate the room, buy a cot, a changing table and other products necessary for the upcoming arrival of the princess. Mr. and Mrs. Plaisirsdelavie have not been able to put any money aside so far, caught between reimbursing Monsieur’s studies, their marriage last year and their current lifestyle. Arrived in store, they very quickly agree on the model of bedroom they want for their daughter: €1,000 is almost a given. However, they do not have this amount available, so the seller offers them to take advantage of the current offer, financing in 24 months . For barely €50 per month , they leave with the room of their dreams.
A few months later, Mr. and Mrs. Plaisirsdelavie are happy to introduce the whole family to the youngest, a pretty baby weighing 3.1 kg for 48 cm. Monsieur and Madame Plaisirsdelavie are the happiest in the world.
6 months go by again, everything is fine. But after many years of good and loyal service, Mr. Plaisirsdelavie ‘s car breaks down. The latter is necessary for him for his work (not everyone is lucky enough to be able to do without a car), so he finds himself obliged to acquire another quickly. Unfortunately, between the rent for the apartment, the reimbursement of the studies and the credits for the room and the wedding, the debt ratio of the Plaisirsdelavie family has become too high to hope for new credit. Their remaining life is moreover just enough to maintain their rhythm of life.
Let’s recap their financial situation:
Their debt ratio is about 44% , which is substantial. In addition, Mr. Plaisirsdelavie needs a car for his work: he has already identified a small second-hand city car, which would be perfect. The latter is displayed at €2,800, but he hopes to negotiate it to €2,500. But for that, it is still necessary to be able to borrow, and even more to have enough left to live to meet the needs of the home.
To get out of this inextricable situation, Mr and Mrs Plaisirsdelavie decide to have recourse to a repurchase of credit. But ultimately, a credit redemption , what is it? It is an operation that allows you to combine several loans, real estate or consumer, that you have contracted with different organizations. You then only have one monthly payment and more than one creditor to repay. The idea is often to reduce your monthly loan payments, with the aim of lowering your debt ratio and increasing your remaining life . On the other hand, the duration of the credit will be longer than initially and this credit will present an additional cost compared to the sum of the credits before the operation.
For Mr. and Mrs. Plaisirsdelavie , €21,210 remains to be reimbursed. Their current monthly loan payments are €575. Their situation after the repurchase of credit will be as follows:
Let’s hope that this little misadventure will have opened the eyes of the Plaisirsdelavie family. Because if the repurchase of credit allowed them to get out of this uncomfortable situation, managing their finances more soundly is an imperative, under penalty of more pronounced disappointments in the years to come… Changing car insurance or saving on their bank charges could be the first ways to save money to better manage household expenses.
This story is obviously fictitious, fictionalized and a bit caricatural. The figures presented are from my imagination. Any resemblance to you or your loved ones is undoubtedly the result of chance! 🙂
Has this situation ever happened to you, or do you know people who have experienced this situation? Have you ever used a credit redemption? In which case?
This article was written in collaboration with Cofidis.