What is a Personal Loan: How a personal loan works?

What is a personal loan ?

The personal loan is a consumer credit. It can allow you to finance all your projects, even without contribution. Depending on the amount borrowed and your repayment capacity, you can generally spread your repayment term over 6 to 84 months. The conditions of the loan are known at the signing of the contract. The interest rate, the amount of monthly payments and the total cost of credit are fixed. They depend on the amount borrowed and the repayment term chosen by the borrower. The faster you repay, the lower the cost of your loan.

The usefulness of the personal loan: purchases and expenses

The personal loan allows you to freely dispose of the sum borrowed: no proof of use is to be provided.

This loan can be used to fully finance one or more purchases (car, household equipment, etc.) or to meet a cash need.

Why choose a personal loan?

The personal loan offers fixed conditions throughout the credit agreement. You know exactly the amount and duration of your monthly repayments. The advantage of the personal loan lies in its cost: the conditions are fixed and the interest rates are lower than for other credit solutions such as renewables for example. The personal loan is a consumer credit not assigned to a specific purchase. It is a financial product that you subscribe to with a credit organization to carry out the project of your choice. How do you know if the personal loan is the credit for you? How does this credit work? Our answers in this guide.

The characteristics of the personal loan

Its amount:

as with any consumer credit, the maximum amount of a personal loan cannot exceed 75,000 euros. However, some financial institutions may offer lower limits and different limits depending on the project you want to carry out. Its duration: it is generally between 12 and 60 months. His reimbursement: it is fixed and you know in advance the amount of the monthly payments for the duration of your loan.

What can your personal loan be used for?

As this is an unallocated credit, you can use this credit for the project you want:

make a consumer purchase (household appliances, car, etc.)

finance a project (birth, wedding, vacation, work, etc.)

deal with an unforeseen event (need for cash)

A loan to use without supporting documents

Unlike real estate loans, which are intended to finance a real estate project, the personal loan is characterized by the fact that it is not dedicated to a particular project. This means that its beneficiary can use it as he sees fit, without providing proof to his bank or credit institution.

The personal loan can therefore be used for various projects such as leisure, a vehicle, housing, or even simply to increase its cash flow to avoid, for example, paying too heavy in the event of a bank overdraft.

How does loan repayment work?

Like any credit, the personal loan obliges the person who took it out to repay the amount borrowed, but also all ancillary costs such as loan interest, insurance or file costs.

In concrete terms, the borrower undertakes to repay each month, on a fixed or variable date, part of the capital borrowed, as well as the interest which constitutes what is called the cost of credit. The part of the capital as well as the interest on this part of the capital are grouped to constitute the monthly payment to be reimbursed.

A loan that can be repaid early

Taking out a personal loan can be interesting for borrowers who have some visibility regarding their future repayments. The repayment of a personal loan can be made in advance for both partial and total repayment.

This reimbursement will generally be made in return for a penalty, the amount of which cannot exceed 1% of the amount of the credit when the duration remaining to be covered is greater than 1 year, and 0.5% if the duration remaining to be reimbursed is less. at 1 year.