Published on : 22 April 20203 min reading time
Financial institutions and banks often offer different credit rates. Thus, it is always necessary to make comparisons to find the best deal. But how does credit work? And what are the regulations in France? Zoom on the subject!
What are the different types of credit?
A credit is a sum of money lent to an individual or a company for different uses. Repayment is made in monthly instalments, including capital and interest. There are several categories of credit, namely :
the real estate credit: it is used to finance the acquisition of a real estate property. The duration can vary between 10 and 30 years
the assigned credit: this is a credit that is dedicated to the purchase of a particular object. Therefore, it cannot be used for other purposes.
and the consumption appropriation: this is intended to cover daily and unforeseen expenditure: purchase of computer equipment, kitchen renovation, etc.
In addition, the appropriations are also classified according to duration: short-term (no more than two years), medium-term (between two and seven years) and long-term (up to 30 years).
Note: Online simulators are now available that will allow you to calculate monthly payments easily and compare proposals.
Who can offer credit?
Credits are offers reserved exclusively for credit institutions:
and the agencies of the Crédit Municipal
Credit is subject to strict regulations aimed at protecting and informing borrowers (the SCRIVENER 1 law n°78-22 of 10 January 1978 and the SCRIVENER 2 law n°79-596 of 13 July 1979). And the law NEIERTZ n°89-1010 of December 31, 1989 frames the prevention and settlement of difficulties related to over-indebtedness. Today, each institution is regularly audited by the financial authorities attached to the Banque de France.
What are the credit regulations?
The advertising media used by a financial institution must include the following compulsory information: the identity of the lender, the financing terms, the cooling-off period, the total cost and the annual percentage rate of charge (APR), including insurance.
Concerning the offer, the document must mention the identity of the parties, the nature, purpose and terms of the loan, the provision of funds, the amortization table, insurance and security requirements, the terms and conditions of transfer to a third party and the fees in case the transaction has not taken place. At the same time, the lender is required to provide the borrower with a credit calculation sheet and a European Standardised Information Sheet or FISE.
In addition, lenders require borrower’s insurance to protect against risks. Likewise, in the event of non-repayment of a loan, the institution may require the borrower to repay the monthly instalments due plus interest for late payment. However, it should be noted that it is possible to anticipate a loan!
Note: In the case of a real estate purchase, the offer is suspended after a period of four months following the acceptance of the loan if the acquisition has not yet been made.
Credit smoothing in a financing plan