The personal loan, also called “consumer loan”, is a loan that finances a purchase or a project. It allows you to quickly release a sum of money, for example to buy a car, a kitchen or furniture.
The real cost of a personal loan: the APRC
A personal loan or line of credit can help you deal with unexpected expenses. As a consumer, you should know that a personal loan is not free and must be exceptional.
The Annual Percentage Rate of Charge (APRC) includes the total cost of the loan, in particular:
- The interests
- Administrative fees for processing the loan application
The APRC can be found in the information you receive from your bank, as well as in every advertisement that mention an interest rate. This information helps you compare personal loans offered by different banks and make an informed decision.
The calculation of your repayment capacity
The bank must assess your creditworthiness, that is, your ability to repay the personal loan without throwing your budget out of balance. To do this, it needs the following information:
- Your financial commitments: other personal loans, a mortgage...
- Your charges: electricity, heating...
- Your current income: salary, pension, rental income...
Based on this information, the bank will assess whether you are able to repay the loan you are applying for. If you have too much debt, it may deny you the loan.
Guarantees for the bank
The bank may ask for payment guarantees, which they can use if you don't pay back the loan. Here are the guarantees generally requested:
- Transfer of salary: as an employee, you agree to authorize your bank to deduct from your salary the amount that remains to be repaid on your personal loan
- Surety: someone acts as surety for you and agrees to repay the loan for you
The duration and interest rate of a personal loan
The usual duration of a personal loan varies from 6 months to 5 years (60 months).
The interest rate varies from bank to bank and can be entered into at a fixed or variable rate. For a personal loan, this is usually a fixed rate. This allows you to know up front the amount to be repaid each month to your bank.
I have signed a personal loan. Do I have the right to change my mind and cancel the contract?
You have 14 calendar days to withdraw from your personal credit agreement. And this is without having to state the reasons why you wish to withdraw. We recommend that you do this in writing.
The withdrawal period begins:
- On the day of the conclusion of the credit agreement
- Or the day on which you receive the general terms and conditions of the agreement, the contractual terms and conditions and the information to be included in the credit agreement, if this day is later than the day on which the agreement was concluded.
In any case, if you have already received amounts, you will have to pay them back, as well as the interest on these amounts.
Can I repay my loan before the end of the contract?
At any time, you have the right to repay your personal loan early, either in full or in part. You must inform your bank in writing. You will then be entitled to a full reduction in the cost of the loan. In other words, you will no longer have to pay interest and charges for the remaining term of the contract.
However, you will have to pay a compensation fee to the bank when :
- The amount of the early repayment exceeds €10,000 in a year
- The interest rate is fixed