Faced with the urgency of an unforeseen, money needs are often felt. To alleviate this need, the revolving credit will allow you to have a sum of money, on an account opened for the occasion, without proof of use.
Beyond the unforeseen, this credit will leave you a total autonomy on your budget and you will be able to use this reserve of money according to your needs.
This revolving credit is also called: permanent credit, revolving credit or reconstitutable credit.
This form of credit corresponds to unallocated personal credit. It does not need to provide your bank with the invoices that justify your expenses. It allows you to use your money freely without being accountable to the lending institution. It is also easier to set up, but interest rates are often much higher.
In order to obtain such credit, you will need to provide the lending institution with some administrative paperwork as you would for a traditional loan application.
Online revolving credit
The revolving credit is subject to the provisions relating to consumer credit. The principle of this credit is to open an account with a lending institution in order to have a sum of money for the payment of interest in case of partial or total use of the said sum. The debtor may use this sum freely. The pace of monthly payments is provided for in the revolving credit agreement.
The peculiarity is that it is reconstituted over your repayments for you to enjoy again.
Specifically, a sum of money, called “reserve”, is at your disposal. You can use it in full or as and when you need. You will also decide on its repayment period according to the terms of the contract. When we say that it is reconstituted over your repayments, it means that the portion of the repaid capital becomes available again and so you can use it again.
Interest is calculated only on the portion of the revolving credit used. They are deducted from the amounts remaining due at the end of each month. The overall employment rate (TEG) is often around 20%.
To use your reserve, you have several options: either ask for a check or transfer to your bank account, or use a specific credit card to pay for your purchases. Increasingly, organizations offer these same credits without a card, making a transfer to your account, which allows you to have only one bank card.
Online credit, in general, tends to develop, as revolving credit has not missed out on this trend. Indeed, you can subscribe to this kind of loan via the Internet. You will have to compare the different possible contracts and the different possible interests. A study of your possibilities is necessary in order not to be confronted with a difficult financial situation.
Online revolving credit application
As a borrower, you need to assess your situation upfront like any traditional credit application. You will need to determine the amount you will need.
The online revolving credit application is similar to the application for a traditional online credit and only takes a few minutes.
The site will first offer you a simulation, which will allow you to position yourself in front of your project and your ability to repay. Once the simulation is entered you can make your request on an online form at the lending institution in question.
If the opinion is favorable, a reply in principle will be sent to you immediately.
Then you will receive, both by mail and by mail, your contract offer. This file will be returned to the credit agency once signed and accompanied by the administrative documents requested.
After the study and the acceptance of the file, the funds will be available as installments on your account within 48 hours from the transfer request.
This course is typical of all loan applications.
Repayment of revolving credit
You will be, in this type of loan, free to increase or decrease the amount of your monthly payment. You will be able to repay your credit in advance, without penalty.
There are two methods of repayment: a slow and a fast one. They make it possible to repay more or less rapidly the reserve used by varying the amount of monthly payments. The more you repay slowly, the more you will pay interest over time. It is therefore better to pay back quickly.
The borrower insurance
The insurance can be optional or compulsory depending on the case. Regardless of the loan, the borrower can subscribe. The insurance will be limited to the duration of the loan and will be used to guarantee the reimbursement in case of unforeseen circumstances.
In principle insurance is optional but some institutions make it compulsory, especially when it comes to mortgage loans.
The insurance covers totally or partially the following cases:
- The unemployment guarantee, which covers you if you lose your job.
- Disability, whether partial or total. When the subscriber is disabled, this guarantee covers the monthly payments of the credit.
- Temporary or total incapacity for work following an accident at work or a work stoppage. The insurance then takes over.
- The death insurance, which provides the relatives of the deceased.
The protection of the borrower by a legal framework
The law is more likely to protect the consumer from possible drifts. In particular, the Lagarde law of 2010, the Hamon law of 2014 and the transposition into French law of the European directive on “residential consumer credit agreements for residential property” in 2016.
Thus, a revolving credit without proof of use is possible, but not without proof of income. It becomes more difficult to borrow without proof of income for the safety of the consumer and protect it from possible abuses of credit institutions. For a long time it was possible to borrow without these conditions but the law hardens. Revolving credit without proof of salary tends to disappear.
For a consumer credit of more than 3 months and for an amount below € 75,000, the Scrivener law applies. It aims to inform and protect consumers. As a result, a pre-loan offer is needed that specifies its total cost and the cost of any insurance. The law gives consumers a cooling-off period, known as the “offer validity date” of 15 days. Finally, the borrower has a withdrawal period of 14 days once the loan has been signed, and if the contract is concluded remotely, during which the borrower can still retract. This period is reduced to 7 days otherwise.
The renewal of the contract
The contract is renewed each year, provided that the lender has previously consulted the National File of Incidents of Refunds of Credits to Individuals (FICP). Similarly, he must every three years check the creditworthiness of the borrower.
However, the credit institution must inform you, three months before the annual deadline, of the conditions of renewal of the contract. You will then have 20 days before the date of renewal to oppose it. Conversely, to mark your acceptance, you must return the document sent to you by the credit institution signed. There is no tacit acceptance. If you do not answer, the credit will be suspended.
The revolving credit, towards over-indebtedness?
The reputation of revolving credit is indeed not very glorious. It has been found that over-indebted individuals most often have one or more revolving loans on their liabilities.
This is probably due to the main advantage of this type of credit: its ease. Indeed, its ease of use and flexibility of use can be detrimental because once the contract is signed, the use of the credit is not subject to the sending of any form or any supporting documents.
Especially for online revolving credits where your will not benefit from an accompaniment by a person in front of you. The virtual can make things easier but can lead to a loss of reality.
The risk is that this simplicity encourages you to make excessive purchases and unthinking.
Similarly, if you experience a decline in income, you will draw on your reserve even if your ability to repay has become insufficient. So this revolving credit will pull you down.