What is a personal loan?
Personal financial loan: definition
A personal loan is a consumer loan granted by a banking establishment or a financing organization to an individual, without obligatory allocation to an expense determined. It allows you to obtain a sum of money paid in one go, repayable in constant monthly payments over a period fixed in the contract.
A way to get consumer credit
In France, it falls under the legal framework of consumer credit, governed by the Consumer Code (articles L.312-1 et seq.). Since the reform resulting from Ordinance No. 2016-351 of March 25, 2016, the credits included between 200 and 75 000 euros are concerned.
Why take out a personal loan?
Finance a project with a quick and easy loan
The personal loan allows you to obtain a usable sum of money without proof of assignment. Unlike assigned credit, it is not linked to a specific purchase. You can finance work, a trip, a family event or the purchase of equipment. This flexibility offers great freedom of budgetary organization.
Dealing with an unexpected expense
A car breakdown, health expenses or an urgent expense can unbalance a budget. The personal loan allows you toabsorb a financial shock by spreading the repayment over several months. Monthly payments are fixed in advance, which facilitates forward-looking management and limits short-term cash flow tensions.
Know precisely the total cost
The contract mentions the APR, the duration, the monthly amount and the total cost of the credit. This transparency makes it possible to evaluate the financial commitment before signing. Most often, the rate is fixed: the maturities remain the same throughout the repayment period, which secures budget planning.
Preserve the banking balance
Using a personal loan can avoid a prolonged overdraft, often accompanied by high agios. By transforming a one-off situation into a structured schedule, the borrower finds a financial visibility. This solution must, however, be considered with caution, taking into account its actual repayment capacity.
What is the rate for a personal loan?
Personal loan rates in France
The interest rate for a personal loan is not legally fixed, but freely determined by the lenderin compliance with the wear rate (legal ceiling). It depends on the borrower’s profile, the amount borrowed and the duration of the loan.
- For a “very good” profile, rates around 2 to 5% can be offered depending on the duration.
- In practice, for the majority of profiles, the average rates for personal loans are often between 4 and 8 %higher for long durations or more risky profiles.
Personal loan: maximum amount
In France, a personal loan is part of consumer credit, the legal rules of which set the maximum amount at 75 000 euros per transaction, repayable over a period of more than three months. Beyond this threshold, it is then reclassified as another type of credit or subject to specific conditions (e.g. real estate loan).
Wear rate
The rate of this credit must not be usurious, that is to say exceed the authorized ceiling rate for the different credit tranches concerned: less than 3,000 euros, between 3,000 and 6,000 euros, more than 6,000 euros. Quarterly, this wear rate is published Official Journal.
How and where to take out a personal loan?
A personal loan can be taken out with a traditional bank, an establishment specializing in consumer credit or via an online loan offered by approved financial organizations.
Different organizations
Lending institutions are subject to the supervision of the Prudential Control and Resolution Authority (ACPR), which ensures compliance with prudential rules and the protection of borrowers.
- The bank branch : suitable solution if you want personalized support and an in-depth analysis of your financial situation.
- Specialized organizations : often more flexible on certain profiles, but with variable rates depending on the risk.
In all cases, compare the fixed APR, any administrative fees and the contractual conditions.
Make a personal loan simulation
The personal loan application begins with a simulation allowing you toestimate the amount borrowedthe duration, the level of the first installment as well as the total cost of credit, often expressed in fixed APR. This step also makes it possible to assess the suitability of the financing solution to the client’s financial situation.
Apply for credit
The borrower then creates his file by transmitting the supporting documents required (salary slip, tax notice, RIB, etc.). The lender then proceeds to analyze the financial situation and consult the regulatory files. After final acceptance, the funds are made available at the end of the 14 calendar days.
Personal loan duration
Depending on the amount borrowed, the credit repayment period must be equal to or greater than three months. The interest rate, the amount of monthly payments and the total cost of credit are fixed. Be careful, the call rates offered by lending organizations are often a sham, since they are based on very short repayment periods (12 months).
Borrower insurance
Although the law does not require it, the lender can oblige his client to take out insurance before granting financing. If this is the case, the credit offer must mention that the borrower has the right to take out an equivalent policy with the insurer of his choice (insurance delegation).
Can you get a personal loan online?
Many traditional banks and credit organizations now allow you to apply for a personal loan entirely remotely. This 100% digital subscription often includes a immediate response of principlefollowed by a final decision within a few working days, then the provision of funds.
Personal loan: how to withdraw?
Right of withdrawal
After signing a personal loan contract, the borrower benefits from a legal withdrawal period of 14 completed calendar days. Calendar days include all calendar days, from January 1 to December 31, including public and non-working holidays, starting from the day after signing the credit offer.
Exercise your right of withdrawal
To withdraw, simply send the lender the detachable withdrawal form attached to the contract, duly completed and signed. The shipment must take place before the expiration of the 14-day period. The exercise of this right results in the cancellation of the contract, without costs or compensation, in accordance with the provisions of the Consumer Code.
Provision of funds
In principle, funds must not be made available before the withdrawal period has expired. However, the borrower can request early release. In this case, if he exercises his right of withdrawal, he must return the paid-up capital as well as the interest due over this period, calculated according to the APR.
Can you buy back a personal loan?
Principle of redemption
It is possible to buy back a personal loan. This operation consists of having one or more current loans taken over by a new financial institution, which offers a new financing solution. The new organization repays the remaining capital owed to the old lender, then sets up a new single contract.
Case where repurchase is relevant
The objective of a buyout is often to reduce the amount of the monthly paymentto extend the repayment period and to simplify management by grouping several installments. The buyout can thus be considered:
- in the event of a change in financial situation;
- to improve one’s remaining life;
- in the event of a hard blow (drop in income, unforeseen expenses);
- to combine personal car loans, work loans or revolving credit.
It can also include additional cash to finance a new personal project, subject to final acceptance after study of the file.
What is the best bank for a personal loan?
A choice to make according to your situation
The best bank for a personal loan depends above all on your financial situation, the desired amount and the repayment period. The same establishment can offer a very competitive fixed APR for a stable profile, but less attractive for a more complex file. It is therefore essential to carry out a custom simulation.
Choosing between online or traditional banks
An online loan often allows you to apply for a loan quickly. Traditional banks, for their part, offer in-branch support and more individualized analysis. In both cases, you must carefully compare the conditions, any application fees and the total cost of the credit before any final acceptance.
The really determining criteria
Beyond the name of the bank, the following elements must be guide the choice of your loan: the fixed APR, the duration, the terms of provision of funds and the flexibility in the event of a setback. The quality of customer service and the clarity of the explanations provided during the study of your file are also decisive.
How to repay a personal loan?
Start of loan repayment
No payment can be required before signing the preliminary credit offer. Reimbursement begins after the legal withdrawal period has expired and the funds have been made available. In addition, no payment can be made before a minimum period of seven days expires from the final acceptance of the contract.
Reimbursement terms
Reimbursement is made by constant monthly paymentsincluding capital and interest, according to a fixed APR provided for in the contract. The date of the first due date is indicated in the amortization table provided upon signature. Debits are made automatically from the designated bank account.
Early repayment
The borrower can repay his personal loan in advance, partially or completely, at any time. The lender may request compensation, capped at 1% of the capital repaid if the remaining term exceeds one year, and 0.5% if it is less than or equal to one year. In any event, this compensation cannot exceed the amount of interest remaining due.
In case of financial difficulties
In case of a hard blow, borrower insurance can cover all or part of the deadlines if the loss is covered by the contract. The borrower can also request a postponement of deadlines, without guarantee of acceptance. Failing this, he can go to court to obtain a grace period of up to two years, or file an over-indebtedness case.
>> Our service – Save money by testing our consumer credit comparator
