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All about consumer credit

All about consumer credit

Loan for consumption, a term that reassures or scares … If this form of credit can allow you to finance one or more projects quickly, it also comes with specific terms that may worry a possible borrower because of their reputation sometimes questionable. Rest assured, there are several forms of consumer credit, each with its own regulations and specificities to meet the needs of the greatest number. Discover the advice of our specialists to finally know everything about consumer loans.

Consumer credit: what is it?

Consumer credit: what is it?

Consumer loan, or consumer credit, is a form of credit granted to individuals to enable them to finance one or more purchases of goods and / or services (vehicle, furniture, equipment, travel, etc.) or still have cash. Supported by banks and specialized financial institutions, the consumer loan is characterized by average credit amounts (from € 200 to € 75,000 for the most part) repayable over relatively short periods of time (more than 3 months for majority) in the form of monthly payments.

There are several types of consumer credit, which we will present to help you choose the right formula for your needs and situation.

Personal credit

Personal loan: what for?

This form of consumer loan consists in attributing to an individual a sum of money for which no proof of purchase or project is necessary. The borrower is free to use the sum at his discretion and without having to justify himself to the bank or lending credit institution. This is the most used form of credit for expenses such as leisure, travel, purchase of a vehicle, financing of work or to repay a bank overdraft.

The personal loan is repayable over a relatively short period of time, ie up to 5 years. The loan rate varies on average between 2.5 and 9%. It evolves according to the lending organizations and according to the maturity of the repayment; it is indeed lower when it is short and on the contrary higher when it is long.

Anyone who is not registered with the FICP (Individual Credit Repayment Incident File) with the Banque de France can subscribe to it. In addition, the borrower must not have a debt ratio greater than 33% in order to obtain a personal loan.

Regulations and terms of the credit

The amount of a personal credit can reach 75,000 euros, for a repayment period ranging from 3 months to 5 years. The law requires any bank, credit institution or vendor offering a personal credit to systematically enter its APR in a clear manner, ie the total cost of the loan including interest rates and associated fees. In addition, the contract must be clear and detailed to protect the borrower. The latter also benefits from a withdrawal period of 14 working days after the signature of the contract, without having to justify.

The appropriated appropriation

The assigned credit: what for?

The credit allocated is a consumer loan that finances a specific project. To be loaned the money he needs, the borrower has to justify his purchase from the bank or lending agency, whether it is financing for furniture, the purchase of a vehicle or any other project.

Since the credit allocated is linked to a specific purchase act, it is inseparable. In other words, if the purchase does not end, the credit is automatically canceled. Similarly, the borrower is not obliged to finalize his purchase if he ultimately prefers to give up; the credit is then automatically canceled in this case also and without additional costs.

The credit rate assigned varies on average between 4 and 10%. The borrower only begins to repay the loan from the moment his purchase is delivered to him, not when the contract is signed.

Regulations and terms of the assigned credit

The terms are the same as a personal loan, since the amount allocated must be between 200 euros and 75,000 euros and the duration of the loan must not be less than 3 months. On the other hand, this form of consumer credit has no real limit in time; however, in general, its duration does not exceed 10 years.

To obtain an assigned credit, the borrower must have clearly defined his project, since he must prove it to his banker or to the lending institution. Without proof, the loan is not validated. Moreover, any person stuck at the Banque de France will not be able to be granted assigned credit.

Revolving credit

Revolving credit or revolving credit

Revolving credit: what for?

Revolving credit is another form of consumer credit. It consists of a sum of money which the borrower has access to at any time, in one go or in several. The amount of this sum is calculated according to the needs of the borrower and according to his solvency. It is associated with a credit card that allows you to use it at any time, when paying for a purchase, without proof.

Generally, this type of credit is not for a particular purchase, but rather for use for daily expenses. Indeed, this sum is accessible according to the good will of the borrower who disposes of it as it pleases, without obligation to spend it entirely. On the other hand, it must be able to attest to an adequate financial situation every 3 years; an audit is carried out by the bank or the lending organization in this sense.

The rate of a revolving credit is high and varies on average between 14 and 20% because of its flexibility.

Regulations and terms of revolving credit

The repayment term of a revolving credit varies according to the amount borrowed:

  • For an amount less than or equal to 3,000 euros, the maturity is 3 years.
  • For an amount greater than 3,000 euros, the maturity is 5 years.

This type of consumer loan is also frequently offered by the points of sale and is very attractive because of its great flexibility. On the other hand, it is also highly criticized, as it tends to push for overconsumption and can lead to over-indebtedness situations – revolving loans now account for nearly 70% of debt overhangs. If you subscribe to this form of consumer credit, be alert to the terms and conditions of repayment; in addition, use it sparingly and reasonably.

Free credit

Free credit

This form of consumer credit has the advantage of only reimbursing you the exact amount of the purchase, since it does not have interest rates and fees. The free credit is only offered at the point of sale. To be effective, the seller must agree not to have applied an increase on the product sold within 30 days before the purchase and not to increase the amount of the credit once the contract has been validated and sign. The borrower can usually pay in 3 or 10 monthly installments at no extra cost.

Student credit

Student credit

This consumer loan is only for students, as its name suggests. It consists of financing the studies of the borrower, but it has the particularity to encompass many elements in this context: tuition fees, housing, food, etc. The advantage is that the student borrower does not start repaying his credit until the end of his studies and he does not have to pay any fees.

This credit does not require a guarantor or income cap, but it is intended only for students under 28 years of age enrolled in a French institution. Any bank or lending agency is free to set the interest rates, the term of the loan and the amount of its choice. On average, interest rates are around 3.5%, for an amount ranging from € 1,000 to € 15,000 and for a repayment period of at least two years.

Rent with option to purchase or Lease (LOA)

This consumer credit formula concerns the purchase of a specific property, usually a vehicle. It is a policy to allow the borrower to rent the property for a certain period of time – determined at the signing of the contract – and for a variable period of 2 to 6 years.

Once the deadline is reached, the borrower can decide whether to buy the property or not. In the case of a vehicle, it allows him to drive a new car until the end of the contract without having to buy it at the end of the lease.

The personal microcredit accompanied

This form of consumer credit is intended for people who are relatively fragile from an economic point of view and who can not benefit from traditional credit. If no minimum income is required, this credit can not be granted without a defined project to rehabilitate the borrower (housing, care, training, etc.).

The borrower is awarded between 300 euros and 5000 euros, for a period ranging from 6 months to 4 years. The rate of accompanied personal microcredit varies between 1.5 and 4%, and the administrative fees are borne by the bank granting the loan.

You are informed! Evaluate your needs to find the consumer credit formula that suits you, study the offers of the market and do not hesitate to compare to better negotiate with different providers that may interest you.