What is a personal loan?
Daily life has many surprises in store for us. Despite our best intentions, sometimes we find ourselves in precarious and unexpected situations. For someone who has little cash on hand and has to incur a high expense, the personal loan can offer an efficient and quick solution. Be careful, however, to know the conditions of the personal loan in order to choose the most appropriate offer.
Considering the many companies that offer the personal loan, it is necessary to make an informed decision to avoid the unnecessary and costly risks that this loan can generate. So, it is important to understand the specifics of this loan which has advantages as well as disadvantages.
The personal loan is convenient because it allows you to finance personal projects, such as vacations or the improvement of a house or the purchase of a car. Since it is a credit operation, it prevents the individual from touching savings or making savings for many years.
It can finance many projects without justifying the destination of the borrowed funds, so the use of credit is completely free. Of course, free doesn't mean free or unconditional, so it's important to educate yourself before you find yourself in an even more difficult tax situation. Despite the less restrictive terms of a personal loan, it is nonetheless a tax liability with higher interest rates and must be over repaid under the terms of the contract.
The personal loan
The personal loan is a credit granted by a bank or a similar organization. Credit is often used for current debts but sometimes is used to pay off previous debts. There is then between the bank and the borrower the credit contract. The bank stipulates the amount, the repayment period, the credit rate and the payment terms as well as the amount of the monthly payments. You should also note the administrative fees which vary from one bank to another, so it is important to understand how this loan works.
Who can access the personal loan?
In principle, the borrower must be over 18 years old and must be a good saver with little personal debt to be able to honor the repayment of the personal loan.
It is necessary to have a stable, professional and sufficiently remunerative job to repay the loan over a defined period. Recent pay slips are often required to constitute a loan application file. You must also demonstrate a certain seniority in the job. In certain cases, a dismissal can affect the study of the file. It is therefore desirable not to be listed in the National File of the borrowing country. The bank can do research to ascertain the individual's tax reputation.
Who can help make an informed decision about personal loan?
There are a lot of different ways to make sure you get an informed personal loan. First, the Credit Guide can help you compare credit offers. These offers must mention the APR (which is the annual percentage rate) and with a personal loan comparator, it is then easier to have access to the best offers on the market. There are many sites that make this task easier and help compare advance charges.
Credit simulation can also be useful to assist in effective financial planning. A credit simulator can make it possible to predict the capacity of the loan but also to anticipate the sums to be paid each month for the repayment of debts. Credit simulation services are easily accessible through the internet. Since a personal loan costs much more than the actual amount granted, the simulations allow you to quickly compare several loan proposals.
Another possibility is to hire a personal loan broker. A broker is a financial intermediary. Its goal is to find the most advantageous interest rates at the most attractive conditions for the client. The broker will therefore put the different financial institutions in competition. It will help to decide the desired loan amount, the project financed by the loan and help to choose the best institution according to the tax situation of the individual.
Like loan comparisons, it is possible to compare brokerage firms as prices vary from firm to firm. Broker rates vary depending on the type of project as well as the amount borrowed. In general, it takes around 5% of the amount redeemed for credit redemptions. And of course, it is possible to negotiate brokerage fees. It is also legally impossible for a broker to receive any remuneration before the conclusion of the loan contract.
What are the terms of reimbursement?
The loan offer must indicate the repayment term, the amount of the loan and the terms of the prepayment. The loan period must be greater than 3 months. There is no maximum term but in practice, personal loans do not exceed 7 years or 84 months. The amount is between $ 200 and $ 75,000.
It should also be noted that the authorized debt ratios are 33% of income, so the loan amount cannot exceed this limit.
According to the Consumer Code, if the amount is less than $ 10,000 you will not have to pay prepayment indemnities (IRA) Beyond this amount the IRAs vary from 0.5% to 1% of the amount of the loan.
The personal loan is a loan repayable at the Annual Global Effective Rate, or APR fixed from 2.90% to 9.90%. It is from this rate that the total cost of the loan is calculated.
He is required to pay constant monthly payments during the period of the loan and if possible pay a larger sum if an inflow of funds allows it.
In case of deadlines
The personal loan is convenient for emergencies or expensive purchases, but what to do in case of other unforeseen costs and financial delays? It is then possible to carry out a deferral of deadlines if you are in payment difficulty. Generally this deferral is granted twice a year but no more. The repayment of the loan is therefore suspended until a later date. It is still necessary to take into account the fact that if the duration of the loan lengthens, the total cost of the credit can also increase.
How to choose a bank or institution?
With all the personal loan offers it is possible to compete. Since each bank offers a different credit rate, you should know that by negotiating it is possible to obtain a lower borrowing rate than the one announced. To do this, you have to go around the banks, present your project, resources and repayment capacity.
Depending on the rates that the banks indicate, it is possible to tell a bank that another has presented a better interest rate. It is then possible to negotiate according to your contribution and repayment capacity. The more the bank takes a risk, the more the rates can go up. You have to know if it is more desirable to have a fixed or variable rate according to your criteria. Of course, it is better to have a fixed rate, as the variable rate can go down but since it is based on inflation, it will tend to increase instead.
The advantages of the personal loan
People wishing to use a personal loan are generally people wishing to access immediate credit without proof in order to finance their future projects. The first advantage of the personal loan is that it is extremely fast. In a few days, the borrower can have access to the desired sum.
The advantages of a personal loan are that it offers a lower rate than consumer credits and revolving credit. It also offers a wide protection to the consumer thanks to the rule of not exceeding the rate of wear. This means that the loan is governed by the consumer code and the credit is adjusted to the needs of each borrower.
The repayment is flexible and it is possible according to the rules of the bank to make a partial or total early repayment without any fees to pay. This is not the case for example with the mortgage.
For a consumer who is often short at the end of the month, the personal loan can keep the account never overdraft. It then helps to avoid a situation of over-indebtedness.
It is also possible in some cases to pay off your loan earlier than expected without paying penalties, which is not the case with all loans.
The disadvantages of the personal loan
Unlike assigned credits which have various insurance policies, personal credit has no insurance in the event of default during the purchase of a good, so it is necessary to ensure the quality and delivery of the goods because even if the sale is canceled you agree to repay the credit.
Thanks to the Lagarde law, it is possible to choose an insurance policy issued by an establishment other than the lender. However, the new contract must present the same guarantees as that offered by the bank financing the loan.
The precautions of the online personal loan
It should be noted that on the internet there are many loan sites and agencies with tempting ads, but it is important to protect yourself from these sites and do your research.
In United States, the only organizations authorized to grant loans are banks and credit organizations like Cetelem or Codifis or other reliable companies. These organizations are listed by the ACRP, which is the Prudential Control and resolution authority.
Another way to search for the company is through ORIAS which is the unique register of Insurance, Banking and Finance Intermediaries.
If a credit organization does not appear in the data of the ACRP or ORIAS, it must be concluded that the company is not reliable.
In United States, registration in the trade and companies register is an obligation, which is certainly the case from one country to another.
Contact details should also be verifiable with an address listed in an official directory, such as the Yellow Pages.
The crooks also do not hesitate to steal the identity of existing companies so check the RCS which is the trade register of companies and the same as the one on the site. The phone numbers should also be the same.
It is recommended to check the mail associated with the domain name. And finally, if during the transaction the site invokes various fees, it is surely a scam.