To lower the cost of your credit , it is possible to set up a piggyback loan , which is also called double-line loan. This arrangement plays on the rate difference between long-term and shorter-term loans to reduce the total cost of credit.
1. How does it work?
The piggyback loan is actually made up of two loans : one on a long term, with a high rate, and the other, usually for a lower amount, for a shorter period and therefore with a higher rate. advantageous. Part of the borrowed capital is then repaid over a short period of time at a lower rate: in total, the average rate on the entire assembly is therefore lower.
Both loans are then smoothed , in order to obtain a constant monthly payment. Specifically, during the repayment of the short loan, the monthly loan will be reduced, then increase after the first loan. You will not see the two lines on your monthly withdrawals.
2. Several thousand euros in savings
In addition to savings on the interest rate, you can sometimes save on credit insurance . In fact, according to the same logic as the interest rate, insurance on a short loan costs less than insurance on a long loan, since there is less risk that something happens to you.
At the end of the shortest loan, you will stop paying the borrower insurance on this loan, which may slightly change your monthly payments (insurance included) downward. It is also possible to take into account this parameter to smooth your monthly payments, insurance included.
Take the example of a loan of € 200,000.
If you go through a traditional loan, say over 20 years at 2%, you will pay a monthly payment excluding insurance of 1012 €. The total cost of your credit will then be € 42,824.
Let’s now calculate the savings you will make by making a loan on two lines. For simplicity, consider that each line is worth € 100,000. The longest line will remain on 20 years, and will be 2% as for the conventional loan. The second will be over 15 years, and so will be at a lower rate, say 1.8%. Once the loan is smooth, the monthly payment will be € 1005 excluding insurance, which will generate a total cost of € 35,593. This assembly will thus make you save 42 824 € -35 593 € = 7 231 €.
3. A montage difficult to obtain? Everything depends…
The trundle loan is little known to the general public, and sometimes even unknown to the bankers themselves.
In addition, a dual line loan file is more complicated to mount, which explains that banks do not offer all this montage. When they offer it, they often take important fees. These fees are either fixed or proportional to the loan amount (approximately 1%). They may also increase their rates or the cost of collateral. Finally, some make it more difficult to adjust the maturities or the early repayment.
To maximize your chances of getting a trundle loan, it is essential to go through a broker , who knows which banks offer it, and how to negotiate it. Pretto will help you negotiate a dual line loan if your case allows it.