A loan, or credit, is a budget advance granted by a bank or financial institution for the financing of a project. The sum borrowed, plus interest, must be repaid in full by the deadlines set by both parties. All of these elements are listed in the said loan agreement.
What are the types of loans?
Depending on the reason for the loan, it is important to separate two types of credit. If the amount is paid directly to the borrower’s account and he can dispose of it at his convenience without having to justify his expenses, it is a personal loan. On the other hand, if the sum is allocated to a specific project, such as the purchase of a car, the loan is said to be affected.
Redemption of credits
Also known as debt consolidation, refinancing or loan consolidation, the redemption of credits involves taking out a loan to repay all others: borrow money to pay back existing loans. The selected financial institution clears all outstanding credits and offers a single loan whereby all payments are combined into a single monthly payment, a single interest rate and a single repayment term. No more complex repayments of different loans.
On the side of benefits, monthly payments, interest rates and duration are specified in advance in the contract and refund management is very simple. On the other hand, it is sometimes difficult to obtain debt consolidation, the duration of the debt and the total amount to be paid are higher.
The same goes for the assigned loan except that the purpose must be specified: the purchase of a car, renovations, … There are generally specific categories of credits for these different loans. To qualify, you must provide proof of purchase to the lender, which, therefore, takes less risk. It has an additional guarantee: in case of cancellation of the contract of sale of the good or the service, the associated loan is generally canceled without additional costs. In the event of non-payment, the financial institution may seize the property purchased on credit. Thanks to this, the interest rates are more advantageous than for a personal loan.
Car loan, motorcycle loan and caravan loan
The age of the vehicle will change the interest rate: the older it is, the higher the rate will be. However, if the purchase concerns a car that has already driven on public roads, and therefore considered as a second-hand vehicle, the borrower will generally benefit from the same conditions as if it were a new car.
In addition, you can request up to 120% of the amount to cover ancillary costs such as insurance, traffic taxes, interviews, etc. In order to benefit from these loans, the borrower must provide the lender with a room proof of purchase. The property concerned then serves as a guarantee to the financial institution which, in the event of non-payment, can seize it.
Different types of vehicles are involved in this loan. It is possible to borrow money to finance a car, motorbike, van, van, caravan, mobile home, an electric bike … It should be noted that, despite different names, it is possible to be a single type of loan.
Loan renovation or work loan
A renovation or work is often very expensive. Entering a renovation loan makes it possible for finance the development and to quickly dispose of the necessary amount for the investment. To do this, simply go to a financial institution with the estimate of the work envisaged or the order form if necessary, and voila. The interest rate is fixed and guaranteed throughout the repayment period.
This type of loan is useful when you want to remake your bathroom, enlarge the house, change the kitchen, build a swimming pool … If the work aims to reduce energy expenditure, it is better to turn to an energy loan, which allows to benefit from a lower interest rate.