To finance the purchase of goods (cars, travel, furniture, etc.) or services (studies, works, etc.) individuals sometimes use consumer credit. In France, only banking establishments approved by the Good Finance (and whose list can be consulted in the register of financial agents) can offer consumer credit. See http://www.tuttosulgsm.com/finding-chapter-13-lawyer.php
Several types of credits can be taken out
Revolving credit: This is an amount available and replenished by the bank each time the customer uses it. A customer can buy a refrigerator at 350 $ for example by having small monthly payments (20 $) but paying high interest on this amount (20% of APR). The customer can reuse his reserve of money to buy another good and will also have to pay high interest.
The multiplicity of “small purchases” can turn out to be expensive. The assigned payday loan: It is a depreciable payday loan, at a fixed rate and constant monthly payment assigned to a particular project. The customer must show proof of purchase or allocation of his loan (works quote for example) Unallocated payday loan: It is a repayable payday loan not affiliated with a particular project. The contractor can use the amount as he wishes. The client’s project, in this case, will only be declarative.
Financial institutions are often voluntarily “opaque” when it comes to offering an offer. Depending on the customer and especially the margin they will make, they push this or that product. Here we will discuss the case of unassigned payday loan: how to choose the right offer and avoid “scams”?
Definition of payday loan
- Definition: Depreciable payday loan is a banking product enabling households to purchase consumer goods or finance their personal needs. The duration, the amount and the periodic repayments are determined in advance and cannot be revised during the life of the loan (except early repayment).
- How the payday loan works: Each month, the borrower repays part of the loaned capital with the interest provided for in the credit contract offer. It is possible to take out a payday loan with a “traditional” banking establishment or in credit establishments specialized in consumer credit.
Financial institutions are required to present the offer in a uniform manner, in order to help the customer compare the offers. These modifications notably took place at the time of the publication of the Lagarde law on July 2, 2010.
Among the essential information that the establishment is required to display are:
– The total amount borrowed
– The duration of the credit
– The amount reimbursed each month
– The total cost of credit
– The overall effective annual rate (APR)
– Repayment terms
These elements cannot be changed during the life of the contract.
COMPARE SEVERAL payday loan OFFERS
In France, a dozen banking players offer payday loans. The wealth of information makes it difficult to compare the different offers. In addition, organizations tend to present the offer in its best aspect: one will have a better rate, the other will offer more competitive insurance, etc.
Also, some precautions are necessary to choose the payday loan best suited to your budget:
Compare the total cost of the loan: this is the set of charges borne by the client over the term of the loan, it must be the main decision indicator.
Compare the amount of monthly reimbursements as well as the overall effective annual rate over the same period (24 months for example)
Is there a personal contribution needed? Some organizations offer very advantageous rates but request a contribution to benefit from them. This is often the case in the automotive industry: manufacturers offer offers at 0% APR but with a contribution of 30% on the total amount of the credit. For an automobile at 15,000 $, it will be necessary to bring 4,500 $ to benefit from the manufacturer’s financing offer.
– Is prepayment available, if so with or without fees?
– Are the administration fees included in the total cost of the loan?
– Compare the additional cost of monthly insurance in the event of job loss or death (some organizations have insurance costs much higher than others)
Example: Comparison of the Good Credit offer and a competitor for a loan of $ 4,000 over 24 months *
In the above offer, the monthly payment compared is lower on the Good Credit offer ($ 173.57) than that of the Competitor ($ 186.13).
The total cost of credit is lower at Good Credit ($ 285.68) than that of the competitor ($ 467.12)