What is a personal loan?
The personal loan is a consumer credit that the borrower uses to buy what he sees fit, without having to justify the allocation of funds to a specific project. It is thus opposed to affected credit , another form of consumer credit. The personal loan can, therefore, be taken out for any type of use: cash flow requirements, purchase of capital goods (furniture, household appliances, automobile, etc.) or provision of services (work, travel, etc.). Its amount must be between 200 euros and 75,000 euros.
It is possible to take out a personal loan from a bank, a specialized credit organization or via a broker. As the customer does not have to justify his purchases, the subscription is simplified and often makes the granting of credit simpler and faster. However, as with any consumer credit, the procedure must respect a certain formalism, in particular to protect the consumer .
Therefore, the personal loan contract is necessarily a contract drawn up in writing (or on a durable medium) and includes a box showing the essential characteristics of the loan, in particular: duration, rate, amount of the monthly payment, possible insurance, additional costs . The contract must also include a detachable form so that the borrower can exercise his right of withdrawal, within 14 calendar days from the day of acceptance of the offer.
It is almost always a repayable loan (with constant maturities in the vast majority of cases) with a duration of 3 months to 7 years, but it is not prohibited to offer personal loans repayable in fine . Most often, the personal loan is granted at a fixed rate but the legislation does not prohibit the use of a revisable rate.
The borrower receives the loan amount all at once, by check or wire transfer, and freely uses the funds.
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Do you need to take out insurance for a personal loan?
Like any consumer credit, the personal loan can be covered by borrower insurance , in order to protect the client and his heirs in the event of death, illness, disability or loss of employment. Lending institutions usually offer their own insurance, but it is quite possible for the interested party to compete and enter into a contract with an insurer.
It is important to know that the regulations do not oblige the borrower to take out insurance . In practice, however, it happens that a lender makes this a condition for granting the loan. If this is the case, this reservation must be indicated in a clear, precise and visible manner in all its advertisements. Note that the APR presented in commercial personal loan offers does not take this into account.
