Consumer credit: personal loan

Verified 31 October 2023 - Directorate for Legal and Administrative Information (Prime Minister)

Do you need a credit to finance various expenses (appliances, works, travel, marriage)? You can make a personal loan. This appropriation may be used freely, unlike the allocated appropriation which must be used for a specific purpose. Personal lending is a consumer credit and the actions of lenders are regulated by law. We present the applicable rules.

Personal lending is a consumer credit that is freely available for use.

You can use the amount of the personal loan to buy a consumer good (household appliances, furniture, car) or a service (travel, car repair, works).

There is no use constraint, whereas there is no use constraint for earmarked credit.

FYI  

This loan does not finance the purchase of real estate or land to be built.

As with all consumer loans, the amount of the personal loan must be between €200 and €75,000.

The duration of the personal loan must be at least more than 3 monthsbut there's no maximum duration fixed by law.

The personal loan is not a free loan, but a interest-bearing loan.

The interest rate of the personal loan is fixed freely by the lender (bank or credit institution), but taking into account the wear rate.

The wear rate is the interest rate legally maximum applicable in France.

The bank may also charge you a claim fee and you can also take out borrower insurance to cover you in case of health problems or job loss.

The bank must notify you on annual effective rate global of the loan. This rate takes into account all the costs incurred by the loan (bank interest, application fees, insurance costs, broker's commission, etc.).

The annual effective rate global of the loan shall not exceed wear rate.

You can apply to the lender of your choice.

You don't have to specify how you're going to use the money.

Your bank can issue this type of credit, but you can also contact a credit financial institution.

Brokers can help you compare the best deals, with a commission on the money borrowed.

Each lender sets its own credit terms and conditions.

The lender may require you to take out insurance from their institution before granting you the credit, even if the law does not require it.

In the event of a payment incident, this insurance will reimburse you.

Verifying your creditworthiness

The bank or credit institution must check if you have the financial capacity to repay the monthly installments of the credit.

This verification is done first by comparing your income with your mandatory expenses (rent or monthly mortgage, heating, electricity, water, food, reimbursement of consumer credits, etc.). This allows the bank to know how much money remains available in your income after you have finished paying your mandatory expenses.

Then the bank has to go to the National Personal Credit Redemption Incident File (FICP) to check if you've had trouble repaying other credits in the past, or if you've ever issued NSF checks.

Where the contract is subscribed over the internet or by telephone, the lender must have you complete a dialog sheet in writing that shows your income, your expenses and your level of debt.

You must sign this dialog sheet by declaring on honor that the information you have given to the lender is true.

If the loan amount exceeds €3,000, the lender must ask you for proof of identity, domicile and income.

Delivery of a pre-contractual information sheet

Before signing the contract, the lender (the bank or the credit institution) must provide you with the information that will enable you to know whether the credit is suitable for your needs and financial situation.

The lender must obligatory provide you with a pre-contractual information sheet containing the following elements:

  • Identity and address of the lender
  • Type of credit (earmarked credit, staff, renewable...)
  • Amount of credit and conditions for making available the amount borrowed
  • Duration of the contract, number and schedule of refunds (per month, every 2 months...)
  • Total amount due
  • The total cost of the charge, expressed as a specific amount
  • Annual percentage rate of charge (APR) (except in case of rent-to-own), with explanations of how this rate is calculated (expressed as a percentage of the sum borrowed)
  • Compensation payable in the event of late payment
  • Existence of a withdrawal period : you have 14 calendar days to give up your credit after the contract is signed
  • Articles of the Consumer Code on the period of validity of the offer and on the minimum period for reflection
  • Your right to obtain, on request and free of charge, a copy of the credit agreement offer
  • In the case of an assigned appropriation, the property or service provided is financed

The pre-contractual information sheet can also be used to compare the merchant's proposed credit to other credit proposals.

Submission of a written offer

If you agree, after reading the pre-contractual information sheet, the bank or financial institution must send you a written offer.

The offer must be maintained for one time limit of 15 free days.

The contract must have a clause that tells you that you have a right of withdrawal that you can practice in a period of 14 calendar days after signing.

You have a deadline of 15 clear days to sign the offer and return it to the financial institution.

Once you sign the offer, the contract is not yet finalized.

For the contract to be finalized, the lender must confirm his decision to grant you the loan within 7 calendar daysand you waive your right of withdrawal

If you have not exercised your right of withdrawal, the bank may pay you the money of the loan after the expiry of the period of 7 calendar days which follows the signature of the loan offer.

You have a right of withdrawal after the loan offer has been signed.

To exercise this right of withdrawal, you must send a letter of cancelation to the lender by registered mail with notice of receipt within 14 calendar days after the loan offer has been signed.

You can use the following letter template:

TO [name and address of the lender] .

I, the undersigned, [your handwritten surname and surname] ,

declares that it has forfeited the offer of credit by [hand-written borrowed amount] euros that i accepted on [date of signature of the hand-written loan] .

[Borrower's date and signature] .

You do not have to make any payments until the credit offer is signed.

You begin to repay the credit only after the signature of the offer and after the expiration of the withdrawal period.

It is only after these steps that the credit agreement comes into effect and you receive the money lent.

Repayment is made by monthly installments.

Each monthly installment includes a principal repayment amount, an interest amount, and an insurance amount if you have opted in.

These different amounts must be indicated separately on the damping table as well as the overall amount of the maturity.

Yes, you can prepay the personal loan.

The procedure and conditions for early repayment must be indicated in the contract.

The bank may include a clause in the contract requiring you to pay an early repayment fee.

If you have trouble paying back your monthly consumer credit, you can do the following:

  • Ask your insurer to pay monthly payments on your behalf, if you have taken out insurance for the credit, and if your difficulties arise from one of the circumstances provided for in the insurance contract (for example, sickness, disability, loss of employment)
  • Ask the financial institution that gave you the credit for any extension or delay in payment. The lender is not obliged to grant you these facilities.
  • Ask the judge for a grace period, i.e. a suspension of repayments for a period of up to 2 years, without surcharges or penalties for delay. You will have to build a file with the documents that attest to your difficulties (resources, charges and reimbursements in progress in particular) and bring your home before the competent court.
  • Drop a over-indebtedness record, if your difficulties are significant and lasting

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