Over credit is the process of transferring loans or credit from old debtors (borrowers) to new debtors. So in other words, other people replace your position as a borrower on the loan application.
For example, you buy a car by credit with a tenor of five years. However, in the third year, you want to sell the car to someone else. Of course there are still loans for two years that must be repaid, right?
There are two ways that can be applied in this case:
- New debtor candidates can pay for the car with the price you requested plus the remaining loan principal. Then, you pay off the credit yourself. The car becomes the property of the new debtor.
- The new debtor will pay the price you requested, then he will continue the credit that you have left to pay off in the fifth year.
Well, the second way is called over credit. When over credit, you must pay attention to the legality of the document and several other important things in the process. Because if you are not careful, it turns out you could be the one who was stumped at the end of the credit period.
How Does the Work Process Over Credit ?
Transferring loans from you to others is not enough to do it with willingness. All of them require filling in special documents as an official in the eyes of the law. What can be done?
1. The process of official credit over through a bank or leasing
For the process of over credit through a bank, you and the seller / buyer must contact the relevant bank. After that, the bank will conduct a credit analysis as well as when applying for a loan.
After the loan application is approved, you must sign a number of documents. Some of them are credit contracts in the name of new debtors. Then, there are notary fees and credit insurance.
2. The process of over credit through a notary
In addition to the bank, you can process over credit through the help of a notary. Here, the credit to be transferred will still be repaid in the same name. However, there is a binding deed in the form of a power of attorney to pay off the loan and collect certificates or securities for goods sold.
The required documents include:
- Photocopy of credit agreement.
- Photocopy of securities related to goods that will be applied over credit.
- Photocopy of proof of installment payment.
- Original savings book for installment payments.
- Data on the identity of the seller and buyer.
The process of over credit through a notary is as safe as a bank because it has legal force. This process also tends to be cheaper than over credit through a bank.
3. The process of over credit is under the hand
You can over credit without having to go to the bank or meet a notary. Just use receipts, loans can be transferred to new debtors.
This step is very cheap compared to the process of over credit through banks and notaries. Because, there are no credit analysis fees, notary fees, insurance, and so on. However, over credit under the hands is not so recommended because of its very weak legal force.
From the seller’s side, over credit under the hand can make credit quality on your behalf worse because the new debtor is still at risk of experiencing bad credit. While from the side of the buyer it will be difficult to sell the asset over credit because it is not entirely yours.
Strengths and Weaknesses Over Credit
There are risks in the application of over credit as it can be profitable or even cause losses, both for buyers and sellers. It’s good to consider the advantages and disadvantages of over credit before buying the desired asset.
1. From the buyer side
The advantage or advantage of the process of over credit for buyers is that the costs incurred are relatively small. The reason is, you can simply forward the existing loan. Which, the previous debtor has paid certain fees that are usually charged at the beginning of the loan, such as provision fees and administrative fees.
The lack of over credit for buyers is the opportunity to get really desirable interest very little. Because, you do have to follow the rules that have existed since the beginning of the loan. Then, usually still the total payment when over credit is far more expensive than you buy cash. It’s also called credit.
2. From the seller’s side
Meanwhile from the seller’s side, over credit can be a tough decision. Because, usually for those who do over credit actually still want to pay off the loan, but what power is experiencing financial difficulties.
However, you can still make a profit, really. At least, you will be free from the obligation to pay installments every month. Then, you can still get the difference in money from the selling price of the asset.
For its own shortcomings, sometimes the price of these assets becomes “freefall” because people know you need money.
For over-credit management, both sellers and buyers must be equally observant about the rules of the game. The seller must want to take care of the process of over credit because buyers usually don’t want to be complicated. So, just watching each other, yeah!