Need to finance a project that is close to your heart, or to replenish your bank account? The personal loan can be quite appropriate in this kind of situation. As a future borrower, would you like to know everything about this type of credit? It’s quite normal! Pioneer in loans between individuals, Younited Credit explains how the rate of a personal loan is calculated and gives you a detailed presentation.
What is a personal loan?
Before even looking at the personal loan rate, it is important to know exactly what this type of credit corresponds to. The personal loan falls into the category of consumer loans. This is an unrestricted loan. The borrower (or debtor) therefore does not have to justify the nature of his project, as would be the case for an assigned loan. In other words, he can make use of the borrowed amount as he sees fit. This money can be used to finance any type of service or consumer good (health or school fees, wedding, travel, birth purchases, household appliances, etc.). It can also meet a cash flow requirement. A personal loan can be granted by a bank or a credit institution. As with any loan, the borrower must first compile a file containing a certain number of supporting documents, in order to finalize his credit application. The supporting documents commonly required are as follows:
Since the Lagarde law of 2010 on the reform of consumer credit, all lenders are required to check the creditworthiness of the borrower, and therefore their ability to repay.
Personal loan rate: how does my bank calculate it?
The personal loan rate is set freely by each bank or credit organization. However, in no case can it exceed the rate of wear. The latter is defined by the Banque de France. It corresponds to the maximum threshold that lenders are authorized to use when granting credit. Objective ? Protect the borrower from possible abuse. But beware, we are talking here about the APR (annual percentage rate), and not the nominal interest rate (also called borrowing rate or bank interest). The nominal rate is only one component of the APR.
The APR is an essential factor in a consumer credit offer. Expressed as an annual percentage of the amount borrowed, it includes, in its calculation, all the costs imposed by the bank granting the loan. The APR thus reflects the total cost of credit.
In the case of a personal loan – and more broadly, a consumer loan – the APR includes, in addition to the nominal rate, all or part of the following elements:
The cost of mandatory guarantees (to deal with the risk of non-payment that would not be covered by insurance);
Good to know: some important details on borrower insurance
In order to guarantee the correct repayment of monthly payments, the lender can oblige the borrower to take out insurance, even if it is optional. Otherwise, he will refuse his file. It is his right. However, the borrower can choose another insurance than that offered by the bank or the credit institution granting the loan.
How can I find the most interesting personal loan rate?
To find the best personal loan rate, and thus realize your project with more serenity, only one solution: compare! As indicated above, the APR expresses the total and real amount of the credit, at least, in the case of a fixed rate loan. It is therefore the best point of comparison between the different personal loan offers. Whether it comes from a bank or a credit institution, any loan offer must mention this rate.
APR is a key indicator. It allows the borrower to instantly measure the competitiveness of a particular bank. Of course, the higher the APR, the higher the total cost of credit will be. The repayment period of the credit also plays on the APR: the more monthly payments there are, the more it will be revised upwards.
Do you know the personal loan rate barometer?
Prior to his personal loan application, and whatever his project, the borrower has every interest in carrying out preliminary work. This happens, as we have just seen, by comparing loan offers, but also, and in the first place, by consulting the rate barometer. The idea, for the debtor, is to know the rates in force. The objective is twofold. Depending on this data, he can both:
Even if the rates of the barometers have no offer value, they allow the borrower to have a fairly precise idea of the monthly payments which would be his. On the simulators used, it is up to him to play over the duration of the loan to consider different possibilities. But we insist on one point: it must be kept in mind that if the amount of the monthly payments decreases by lengthening the repayment period, the total cost of the loan will ultimately be higher. The reason is simple: the borrowing rate is proportional to the term of the loan.
