All About the Loan Rates Works
Thanks to the development of the Internet, institutions specialized in consumer credit have emerged on the web. Today these institutions have almost supplanted the banks that were the traditional praetors. For some types of loan, the consumer does not hesitate to do his research on the Internet Consumer credit is granted to households so that they can finance purchases of consumer goods or services.
The loan works falls into this category in the same way as the car loan for example. Although it is not suspended for the purchase of a specific good or service, the work loan has the characteristics of a consumer credit.
Thus, if a household wants to carry out work and find a means of financing, it can turn to its specialized organizations that will have solutions to offer. The loan works is for individuals whether they are owners or tenants. It makes it possible to finance works of extension, embellishment, development of attics, etc. a real estate property. T
he household can turn to this type of financing when it does not have the necessary funds in full or if it does not wish to use all its savings on this item of expenses. It is important to keep a cash flow for other items in the event of unforeseen circumstances and not to degrade its financial position.
Like other consumer loans, limits and ceilings will apply. Depending on the different lending institutions, different ceilings will be used. On average, the borrower will be able to borrow between € 3,800 and € 75,000 for a period of 36 months to 120 months (10 years). The amount can be freely chosen by the borrower. He will also choose the amount of his monthly payments and the duration of his credit.
However, he must make his choices according to his ability to repay. Before applying for a loan, consumers are advised to calculate their debt ratio. It is a question of calculating what the expenses of the household represent on its incomes. Specialized sites are present on the Internet to calculate it for the consumer. If this rate is higher than 33%, it is not advisable to borrow.
In general, consumer loan applications with a debt ratio higher than this ratio will not be accepted by lending institutions. The consumer must take responsibility and not make loan applications with monthly payments too important that he can not repay later. Some unforeseen events (financial, family, professional, etc.) can occur, leading the borrower to no longer be able to repay his monthly payments. The latter must, therefore, keep a margin when making requests in order to overcome these situations.
The different websites provide credit simulators. These simulators do not engage the consumer. He is free to do as much research as he wants, for current situations or not. The consumer will only have to indicate the reason of his loan (here ready work) then to inform the amount wanted. Depending on the chosen institution, the consumer will choose monthly payments before or after the simulation result. The consumer can then know the different rates applied depending on the amount chosen and the loan agency.
During simulations, the consumer may find that the longer the credit period, the higher the interest rate applied.
In fact, remember, the interest rate is the remuneration of the lending institution. For example, if the consumer borrows € 1,000 at the rate of 3%, the remuneration of the establishment will be € 30.
The longer the loan period, the greater the risk of not being paid. The risks to the borrower of not being able to pay his monthly payments are much greater over a long period than over a short period. For example, the borrower is more likely to lose his job over a period of 5 years than over a period of one year. Thus, credit institutions try to counter this risk by increasing their remuneration, thus reducing their losses if the borrower does not pay its debt in the future.
The result of the credit simulation “works” will allow to resume the essential elements of the loan application. It will indicate the sum chosen, the duration of the monthly payments and their amount, the APR applied and the total amount due by the borrower.
The APR is the annual percentage rate of charge. It takes the interest rate set by the organization, to which will be added costs, fees and miscellaneous commissions (fees or application fees for example). This rate allows the borrower to know the real cost of his credit and can compare different offers. This rate is set freely by each institution.
However, it can not be higher than the “wear rate”. This rate is published quarterly by the Banque de France and is different depending on the type of loan (consumption, real estate, etc.). Prosecution and judicial sanctions are planned for professionals who do not respect this rate. In the third quarter of 2016, the usury rate is set at 12.91% for fixed-rate consumer loans ranging from € 3,000 to € 6,000 and to 7.40% for loans whose exceeds 6,000 €.
The loan works generally enjoys a higher loan rate than other rates on other loans. Indeed, on the loans allocated, the rate is more attractive to the extent that the loan is directly related to obtaining a particular property. It could be for example a car. In this case, the risk incurred by the lending institution is very low since it knows the exact purpose of the loan application. In addition, the loan is suspended upon delivery of the property, funds will not be issued if the property is not delivered or is not compliant. The establishment is committed to a certain and certain situation.
In the case of loans for work, the situation is not so framed and secure for lending institutions. The latter give sums of money so that individuals carry out work. The issue of funds is not suspended upon the delivery of a particular property. The issuance of funds is suspended in a situation that may not be that predicted by the borrower.
Indeed, delays in the work for example may lead to unforeseen expenses leading the borrower to be unable to repay some of his monthly payments. Sometimes, the latter will have to regularize his monthly payments while his work will not be finished.
In order to avoid any eventuality, specialized lending agencies prefer to apply a higher rate on this type of loan than on others. The “work” situation is likely to change, become worse and lead to an increase in household expenses. By charging higher rates, the institutions make up for any non-repayments.
It is bringing for the consumer to pay particular attention to the solution proposed by lending institutions. Although they are legally obliged to offer personal loans (here loan work) in priority, some do not hesitate to put forward the revolving credit. In this event, it is a question of making available to the borrower a certain amount of money which he can reuse as and when repayment is made.
For example, if the borrower is loaned € 3,000 and uses € 2,000, he will only have € 1,000 available. But as and when reimbursement of the sum of 2000 €, the amount available will increase. Revolving credit can be an appropriate solution when the household has one-time cash needs for undefined purchases. However, the rates charged for this type of credit are very high (around 20%) to the extent that the funds lent are not for a specific situation. The risk for lending institutions is therefore much higher.
Because of the higher remuneration on these types of credits, professionals often offer them before personal loans (less remunerative). Consumers will be implicitly oriented through advertising and marketing towards these types of solutions. In this situation of need for specific cash (work), the personal loan is a suitable solution and must be chosen by the consumer. top