The personal loan is a consumer credit that allows you to finance certain events in your life. This loan is unrestricted, which means that you will not have to explain the reason for your loan. In this article, we will tell you all about the personal loan, how it works and how to get it.
What is a personal loan?
The personal loan is a consumer credit that allows you to finance the design of your choice without having to explain it to your lender.
It is not intended to finance an overly large purchase such as a real estate purchase. Indeed, the personal loan is an unrestricted loan, which means that the organization which grants it to you is not required to ask you the reason for the loan.
So you can for example finance the following events:
- Decorations ;
- A world tour ;
- A marriage ;
- A travel.
Like every bank loan, it has its own characteristics or repayment terms.
This fixed interest rate credit is offered by all lending institutions, whether:
- Banks ;
- Online banks;
- Credit organizations.
What is the amount of the personal loan?
For several years now, consumer credit has been strictly regulated by law in order to limit any abuse.
The maximum amount of the personal loan was revised upwards with the Lagarde law in 2010. From now on, the borrower can contract a personal loan up to $ 75,000, compared to $ 21,500 previously.
In all cases, the amount of the personal loan cannot be less than $ 200.
In addition, the personal loan is also subject to constraints relating to the repayment period, which is between four months and seven years.
What are the personal loan rates?
The personal loan is the type of consumer credit most used by the French.
Unlike many loans, personal loan rates are fixed and therefore cannot be revised.
The Annual Effective Annual Rate (APR) depends on the duration and the amount of the loan. The shorter the repayment period, the lower the interest rate. By paying larger monthly payments, the borrower therefore chooses a less expensive credit.
Here are the rates in effect in March 2020, for a credit of $ 15,000, over twelve months:
|Minimum APR||Average APR||Maximum APR|
These values are far from being fixed because the loan rates are constantly revised upwards or downwards. Most of the time, the rates displayed do not include the administration fees or any insurance costs.
How to get a personal loan?
The personal loan is distributed by banks and most so-called specialized establishments. These establishments are regulated and controlled by the banking authorities and grouped into the FBF and the ASF.
To make a personal loan, you can contract it directly with the desired establishment or use the services of a broker to compare the rates in force.
A personal loan is a contract between a lending institution and a borrower, where the former undertakes to lend a defined sum of money and the latter undertakes to repay it.
The personal loan includes the following elements which must be mentioned in the contract:
- The loan capital;
- The APR (the annual effective annual rate);
- The duration, amount and number of monthly payments;
- Any guarantees and insurance;
- The total cost of credit.
The personal loan is governed by the consumer code and provides the borrower with a right of withdrawal of fourteen calendar days.
How to repay your personal loan?
The repayment period directly affects the amount you have to pay monthly.
If you want to settle your debt as quickly as possible, choose a short repayment period. Each monthly payment will be higher, but the interest rate is lower.
If your monthly budget does not allow you to repay a large amount, opt for a longer repayment period. The amount of your installments will be lower, but you will be in debt longer and the total cost of credit will be higher.
You can request to repay your personal loan via prepayment. The latter, completely legal and which cannot be refused by any bank, can be total or partial. The early repayment of your personal loan relieves you of interest and costs that corresponded to the remaining term of the loan.
How to redeem your personal loan?
Borrowers who hold multiple credits outstanding at different institutions or organizations often experience financial difficulties.
The repurchase of credit is a practice which consists in merging different credits in progress to form only one. Thus, the borrower is left with a single monthly payment, at a single rate, with a stable and fixed repayment duration.
The repurchase of credit with personal loan is aimed at all individuals, whether they are employees, self-employed or retired. People in a prohibited banking situation can benefit from the repurchase of personal loan on condition of being owners.
The establishment to which you ask to redeem your credits will settle all your outstanding loans with the various banks or lending organizations. He will then suggest that you take out a new loan in order to consolidate all of the debt with a single creditor.
How to calculate your personal loan?
To calculate your personal loan, you will first need to define the amount to borrow according to your purpose.
Then, you will have to choose the repayment period. It directly affects the amount repaid each month as well as the total cost of the loan. Indeed, with a longer repayment term, the monthly payments will be lower, but in the end you will pay more for your credit. If you choose a shorter duration, the credit will theoretically be cheaper because the interest due on the amount of your credit each month is calculated according to the capital remaining to be reimbursed.
Finally, you will need to compare the offers according to the rates and fees set up. The total cost of the loan includes the interest due on each monthly payment as well as the amount of insurance. The administration fees may be included in the APR proposed on the credit offer and they should not be forgotten.
To find out the best rates for your personal loan, you can use this fast and free simulator or contact our team of Across Lender experts directly for personalized support.