Who can get consumer credit?

Consumer credit is financing granted by a bank or other lending institution to an individual for purchases of goods or services. However, this credit is not available to everyone. Credit rules are imposed by creditors. 

Conditions for taking out consumer credit

Conditions for taking out consumer credit

To subscribe to a consumer credit, you must: be of full age, receive stable income, reside in France, not be registered in the national file of payment incidents of the Best Bank. This last restriction is intended to avoid cases of over-indebtedness.

More concretely, the lender will attach particular importance to the age of the borrower. Indeed, a borrower who is too young appears less solvent in the eyes of analysts, in particular because of the professional instability linked to this age group. An overly aged borrower, on the other hand, is considered to be at risk by the bank. In general, people with stable incomes, with an acceptable level of savings and a certain family stability represent the standard profile of a consumer credit underwriter.

How to take out consumer credit?

How to take out consumer credit?

Taking out a mortgage is a strictly regulated action. Before signing his credit contract, the borrower must complete an information sheet indicating his family and professional situation, his possible current loans. This information is the subject of a declaration on honor. If the amount of the credit exceeds 3,000 USD, the borrower must provide supporting documents (pay slips, tax notices, etc.). This sheet allows the lender to determine the type of financing most suited to the applicant’s situation.

When his loan request is accepted, the borrower receives a prior offer of credit valid for 15 days from its delivery or its sending. The offer indicates the amount of the credit, its purpose, its rate, its duration, the cost, the APR as well as the repayment terms. The terms of the proposal cannot be changed during this 15 day period.

Once the credit offer has been accepted and then signed, the borrower has a withdrawal period of 14 calendar days. This period is 3 days in the event of immediate delivery of goods purchased with an assigned credit. It is possible to be accompanied in these steps by going through a specialized banking intermediary.

How long does it take to pay out a loan after it has been approved?

Those who take out a loan usually don’t want to wait long for their money. Or worse: he or she is urgently dependent on paying an invoice or making an urgent purchase. Therefore, we have created an overview of the period of time you can now expect for the payment.

Of course, the processes differ fundamentally in whether you take out an online loan or take it out in a bank branch. Furthermore, banks generally do not work on weekends. So always assume normal weekdays (Monday to Friday). So seven days means that you would have to wait from Monday to the following Wednesday. Please also note that the information is based on experience and we cannot give any guarantee or guarantee for the corresponding payout period.

With an online loan:

With an online loan:

  • You fill out an application form and store all data truthfully and completely.
  • Subject to the correctness of your information, many providers will issue an immediate approval if the creditworthiness is sufficient. However, since the bank is obliged to check the borrower conscientiously, the documents must be sent in by post. This initially takes 1-2 days.
  • As soon as your complete documents and the signed contract have reached the bank, they will be checked by the clerk. Depending on the number of applications and the provider, this also takes 1-3 days.
  • Finally, if everything is OK, the money will be transferred to your account. If you do not have the account with the same bank, you have to plan for another 1-2 days until you have the money available.
  • The bottom line is – if everything goes smoothly – three days to a week.

With a branch loan:

With a branch loan:

  • The procedure here is the same except for the first two points.
  • The difference is that you first make an appointment with a bank employee. Depending on the workload, this can take a few days. If you are lucky, you can start the credit conversation right away.
  • Such a personal conversation naturally also takes time (30 to 60 minutes + arrival and departure). You should therefore have brought all the required documents with you by this date. The specific requirements are usually given to you when you make an appointment.
  • If the conversation is positive for both sides – that is, you have sufficient creditworthiness for the desired amount and you are satisfied with the bank’s offer – you will receive a preliminary loan approval and sign the loan agreement. Now 1-3 days pass again until the documents are checked (sometimes a binding credit decision can also be made immediately) and the loan is finally paid out, which can also take another 1-2 days by transfer.
  • With a branch loan, it only takes one to five days from the approval to the money in the account. However, the on-site appointment usually gives you a few days in advance. On the other hand, you also have to leave the house with an online loan to put the documents in the post.

Tips to get the money faster:

Tips to get the money faster:

  • First research the providers who are shortlisted for a loan on the Internet. Find and read testimonials and opinions from other customers.
  • Have all documents ready. For an online loan, also an A3 envelope and the necessary franking.
  • Despite the fact that the payment may be faster, do not pay attention to the interest rate if two days are more or less irrelevant.

Why was my loan declined? What should I do now?

For the bank or loan agreement, a loan is primarily a business. This is supposed to bring profit through the loan interest and no losses due to missing installments or even the complete insolvency of the borrower. Therefore, the lender must use all of the available parameters to calculate the likelihood of the loan being repaid. So this has less to do with personal reasons and nothing to do with luck, but simply with concrete criteria and facts.

Banks are also regulated by law and regulations when granting loans: They must first get a comprehensive, up-to-date and secure picture of the creditworthiness of the potential customer.

What are the most common reasons for a loan rejection?

What are the most common reasons for a loan rejection?

In most cases, the rejection is not based on formal errors (e.g. documents forgotten when applying for a loan) but on insufficient guarantees that the applicant can offer the lender.

  • Your own income is too low or your expenses too high
    The bank not only looks at the monthly wages or other income, but above all at what these regular expenses stand in contrast to. If these are so high due to rent, other current loans, leasing or maintenance payments and the cost of living that little or nothing is left per month, the bank simply has to refuse the loan. Even if you do not disclose such current expenses in the self-disclosure, the bank usually gets this from credit agencies and the trust in customers is permanently disturbed. But even if you can cheat yourself, there is still the risk of a subsequent termination of the credit without notice and the full amount in one piece being reclaimed.
  • You are still in the trial period
    This is also too unsafe for the bank, as it is easy to cancel here.
    Click here for our topic page “Probationary period loan”
  • You only have a temporary employment contract
    If you are only employed for a limited period and the time limit is before the planned end of the loan, the loan is usually rejected here as well. The same applies to temporary work.
  • You have a negative Credit Bureau file
    Banks obtain Credit Bureau information about the borrower when applying for a loan. If this indicates bad creditworthiness through a corresponding history, the bank will also reject the loan. In this case, please also note our topic page “Opportunities for loans without Credit Bureau”.
  • Insufficient account funds / suspicious debits
    With the required documents for the loan application, the most recent bank statements must also be included. If it can be seen from these that direct debit authorizations that are already in progress cannot be serviced and this leads to return debits, this is also a warning signal for the bank. The same applies to an account that is permanently in the overdraft facility or even beyond. If there are even debits from collection agencies on the bank statements, the bank no longer needs clairvoyant skills to identify potential problems with loan repayment.
  • Unfortunately, you are too old
    Although people are getting older and longer in their active lives, the banks have an age limit from which they can no longer issue normal loans. This varies from bank to bank and is not readily disclosed. Please also see our topic page “Loans for pensioners”
  • You have n’t been self-sufficient long enough
    Loans for the self-employed are a challenge for banks. You cannot include attachable income in the calculation, but rely on the balance sheets and the assessment of the sustainability of the company. If the loan applicant is only self-employed for 1-2 years, there are simply no reliable figures for such forecasts.

What should you do if your loan is declined?

What should you do if your loan is declined?

In any case, do not fall for dubious offers that promise an “uncomplicated and quick loan despite rejection from the bank”. First of all, despite all the disappointment, one should understand the rejection as a factual criticism and as an indication to improve one’s own situation. Don’t be afraid to take advantage of free professional advice (e.g. debt counseling).

If, after honest self-reflection, you are absolutely certain that you do not want to take out a loan unreasonably, hopefully reputable credit advisors can help you. 

The search for a bank that easily grants loans may also be a variant. However, you should note that with every binding loan request, a corresponding temporary note is usually stored in the Credit Bureau file, which in turn can lead to a deterioration in the creditworthiness of the next loan application.

Early exit from expensive loans is often possible

The historic low interest rates are favorable for those who are currently entering into a loan agreement. In particular, construction loans with their long terms can be a few thousand USD cheaper than a few years ago.

If you want to get rid of such a current loan with high interest rates and continue to finance the remaining amount with a cheap loan, you actually have to pay the prepayment penalty to the bank. These in turn reduce the savings considerably. Add to that the effort.

Invalid cancellation policy

Invalid cancellation policy

According to the law, a valid credit contract includes a cancellation policy in which the customer is informed about his right of cancellation. This means that he can cancel the contract within 14 days without giving any reason. Now the consumer advice centers have checked revocation instructions for almost 10,000 loan contracts and found that 80 percent of them were incorrect. Loan agreements that were concluded between November 2002 and mid-2010 are relatively easy to estimate and can therefore be challenged.

From 11.06.2010 the legal situation was changed significantly and the necessary examination is then more difficult and must be carried out in more detail. But even with these contracts, it can be worth checking whether there is an option to object.

With contracts prior to 2002, something can be done in particular if it is a question of door-to-door sales.

The important thing is: each case and contract is different and must be examined individually.

If, from the expert’s point of view, the instruction is invalid, the contract can still be revoked years later if the 14-day period has long passed. In this case, the prepayment penalty also does not apply.

How do I proceed with the revocation?

How do I proceed with the revocation?

The first thing to consider is whether a revocation would be worthwhile. If the remaining debt is relatively high and the contract runs for a few more years, it is worth examining it closely. Before you go to your bank, you should definitely have a lawyer or a consumer protection expert examine the contract. If the answer is in the affirmative, you should also take care of follow-up financing.

But be careful: the subject of consumer credit law is complex and the legal situation has changed several times. Not every lawyer is the right contact for this. Even a specialist lawyer for banking law or investment law is not always the right choice. The lawyer should therefore be carefully selected and the lawyer should be thoroughly familiar with the area in order to assert himself against the bank.

However, the chances of success are assessed differently: consumer advocates prefer to lower expectations and warn of lengthy legal disputes. Lawyers specializing in the field and successful here, however, make good forecasts. Experience has shown that the revocation is easier to enforce at savings banks as well as Volksbanken and Raiffeisenbanken than at large banks, which are more concerned with a legal process.

Even if you have processed a loan early and paid the prepayment penalty, experts still have chances. Under certain circumstances, you can then not only request this compensation back, but also compensation for the use of interest and principal payments that have already been made.

Conclusion

With a successful revocation and further financing at the current low interest rates, thousands of USD can be saved. Two percent are already making themselves felt here. In any case, one should not enter this legal thicket without professional support.

How many credits can you have at the same time?

The question of the maximum number of loans a loan customer may have has to be examined from different sides.

Different types of loans

Different types of loans

It is very common to pay off several loans if they serve different purposes. The classic is the real estate / car loan constellation. However, various parallel consumer loans such as in the furniture store, electronics store and the bank for used cars are also common, since the relatively low rates of these small loans can be managed for a normal earner.

Credit rating for multiple loans

Credit rating for multiple loans

The decisive factor when considering the limitation of loans is not their number, but rather the resulting sum of the monthly installments and the regular monthly financial resources to service the loans.

So if you are already up to your neck with the repayment of one or more loans and you see your salvation in taking out another loan in order to be able to manage your running costs or the loan installments, there is a risk of over-indebtedness.

As a result, the banks do not carry out their creditworthiness checks in order to harass the credit-willing customer, but rather to protect them against insolvency and, of course, against the default. In addition, lenders are legally obliged to check the creditworthiness of the customer before granting the loan and to take this into account when making the loan decision.

Hiding the existing loan does not help, since the bank can see it immediately via the Credit Bureau query (which you are obliged to apply for when applying for a loan). The bank’s credit calculator then provides a positive or negative credit decision after including all criteria (e.g. the number of years of employment, monthly income and regular expenses).

increase taking out a loan

increase taking out a loan

Before you take out another small loan, you should ask the lender of the existing loan whether you can add the desired amount. With a good credit rating, the bank has no problem with that either. A new loan agreement will then be drawn up to replace the previous one. Of course, this extends the term or the rates increase and in any case you should also try to renegotiate the conditions (e.g. the interest rate), but increasing the amount of a current loan is a sensible instrument when there is an unexpected need for capital.

debt restructuring

debt restructuring

In addition, it may well be worth considering the possibility of debt restructuring – that is, combining several loans into a single loan. The existing loans will be replaced with a debt rescheduling loan. On the one hand, this can be cheaper due to the current interest rate level, and you can also keep a better overview of your monthly installments by reducing the number of your creditors.

Avoid another loan

Avoid another loan

Last but not least, we would like to remind you once again and to avoid avoiding another loan as another option. Depending on the reason for the borrowing, this only improves the situation in the short term and possibly limits the financial possibilities for a long time.
A waiver, saving or optimizing your own financial situation may help. In any case, the project should be carefully calculated – and all options should be considered.