Still called “revolving” despite the Lagarde law of 1 July 2010 “reforming consumer credit”, the revolving credit or the “reserve of money” represents a consumer loan out of five.

Considered dangerous by consumer associations, it remains the leading cause of household over-indebtedness as 8 out of 10 files filed with the Banque de France mention one or more loans of this type.

Definition

This is an original form of unrestricted consumer lending, which allows the borrower to freely dispose of a sum of money and sometimes combines means of payment such as credit card. It is offered by major banking networks, specialized establishments and major retailers.

Operation

Replenishment of the reserve

Replenishment of the reserve

The amount is reconstituted “on the water”, that is to say after each repayment monthly, on the basis of the amortizable part.

 

Object of the loan

Object of the loan

The revolving credit can be used for any type of expense without you having to provide proof. However, be careful not to consider this flexibility as an “overflow of the overdraft”. This is a loan in its own right.

Duration of the contract and renewal

The contract takes effect when the offer is signed. Since May 1, 2011, you have a 14-day cooling-off period . The duration is one year renewable tacitly. Every year, the organization informs you 3 months before the anniversary date of the contract. You then have 20 days to signify your refusal. But you will have to pay in one go the capital remaining due.

The refund is made for a maximum period of 3 years for an amount less than 3000 euros and 5 years for a higher amount.

Modifications and closing

The rules of change are in favor of the borrower. You have the option of converting your revolving loan into a repayable loan. In addition, in the event of an increase in the credit line , the bank will have to send you a new offer.

Finally, in case of non-use of the sum for 3 years, the contract is broken. This term will be 2 years from May 1, 2011.

 

Insurance

Insurance

Insurance is not compulsory. If however you wish to subscribe one, know that you have the possibility to opt for a delegation of insurance. Compare the rates and play the competition.

Refund

Refund

Most often the borrower pays back as he pleases . Be aware, however, that each repayment includes – as is the case for conventional loans – a share of interest and a share of capital depreciation. Since May 1, 2011, the law imposes the reimbursement of a minimum monthly payment. For a loan of 1,000 euros, you can not repay less than 35 euros.

Interest rate

Interest rate

Every quarter, the Banque de France determines the attrition rate for each loan category. The one used as a basis for calculating revolving credits culminated in the fourth quarter of 2014 to:

  • 20.28% for an amount not exceeding 3000 €
  • 14,59% for the amount of 3000 to 6000 €
  • 9.47% for an amount greater than 6000 €

The dangers facing low-income households

  1. Money reserves are extremely expensive with interest rates close to usury rates.
  2. Secondly, it remains the major cause of household over-indebtedness and as such a real risk for the most vulnerable people.
  3. Finally, the rate shown at the start is not necessarily the rate that will be applied when you use your reserve. This is usually a revisable rate .

 

Numeric example

A borrower subscribes a revolving credit for an amount of € 2000 at the rate of 18% as of January 1, 2014. He opts for monthly payments of € 50 per month. On March 1, 2014, the borrower uses € 500 for various purchases.

He no longer uses his reserve for the whole year and simply reimburses his monthly payment.

  • In May 2012, he uses his reserve to the tune of 1000 €.
  • In September 2012, he reimburses in addition to monthly payments 500 €
  • On January 1, 2013, he definitively paid off his loan.

The LAGARDE reform

 

The LAGARDE Consumer Credit Reform Act of 1 July 2010 attempted to put an end to excesses and false advertising. Its application took place in two stages.

  1. A first operational component in July 2010
  2. A second component will take effect on May 1, 2011.

Judged insufficient by the consumer associations that demanded greater accountability of banks, it is, however, in our view a real step forward in the protection of borrowers and especially the most fragile households.

Changes effective May 1, 2011.

Since May 1, the second part of the Lagarde reform will apply. The loan term will be capped to limit the cost of credit. Thus, a loan of less than 3,000 euros will have to be repaid over 3 years maximum a loan of a higher amount, over a maximum of 5 years.

Three different rates of wear will be used as a basis for revolving credits depending on the amount borrowed, instead of just one currently.

  1. Up to € 3,000
  2. From 3,000 to 6,000 €
  3. More than 6 000 €

At the time of the proposal, the bank will have to leave the choice to the subscriber between the reserve of money and a repayable loan. In addition, she must ensure throughout the loan that the borrower still has the ability to repay.

The credits proposed by major retailers

If you buy your loan in a department store , know that in case of withdrawal, only the loan is concerned and not the property itself.

Our advice: if you wish to benefit from an extended withdrawal with the purchase well, prefer an affected consumption loan, which allows you to cancel the sale in case of refusal of loan .