8. French Bank Loans
8.3. Types of Bank Loans in France
Unsecured general loans are referred to as le crédit de consommation. They come in various different forms, be they short term, revolving or permanent.
The most common form of loan is a prêt personnel, which can be granted for any period from three months to five years, and for any purpose.
At the present time rates for such loans are around 2.0% pa (2018), although if the loan is for less than €1,500 it can be considerably higher than this rate.
Loans for home improvements, are called crédit travaux, whilst those for the purchase of a car crédit auto.
You may be able to borrow up to 100% of the purchase price of item or use the loan to meet ongoing cash flow requirements. A constant amount per month is repayable over a fixed period.
A loan offered by a supplier through a finance house for the purchase of a car or other other major item is called a prêt affecté.
They are generally more expensive than prêts personnels and the lender may take a charge, called a gage, on the goods purchased.
You may find some major retailers and car distributors offering loans at 0%, but watch the small print for fees.
Leasing credit arrangements are known as la location avec option d’achat (LOA). The loans are often made by a finance house linked to a supplier, rather than through a bank.
Under this type of facility the goods are effectively rented to you and you are granted a right to later buy. A deposit of 15% of the purchase price is normally required.
Finally, there are also a range of revolving credit facilities, called crédit renouvelable/permanent available either through a credit card or one of the larger retail outlets. There are no guarantees given on a fixed rate with credit of this kind, so the rate is liable to vary. Expect to pay at least 16% pa.
If you have several debts and you want to bring them together under a single loan, this can be done through a process called rachat de crédit.
In considering refinancing loans of this kind, you need to be particularly attentive to the fees.
Provided the loan is of a personal nature for a period over three months and for an amount under €21,500 the borrower benefits from strong consumer credit legislation.
Thus, borrowers have a right to a full written offer which must state, amongst other things, the real rate of interest they are paying (the TEG) and the total cost of the loan.
Once you have signed the contract you have the right to withdraw within seven days if you change your mind.
You also have a right to repay at any time without penalty.
If you later get into difficulties making the repayments there is an interest cap on any overdue payments. In serious cases, you can seek relief or assistance from through a special public debt body based in each département. See 9.6. below.
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