In recent years, more and more people have applied for installment credit. What is special about this type of loan? How to ensure reimbursement in the event of financial difficulties?
Installment credit: what is it?
The installment loan or revolving credit is a consumer credit, a loan contract is signed in a conventional manner between a credit institution and an applicant, then capital is made available to the borrower who s ‘undertakes to repay the loan and interest periodically.
Unlike the classic consumer credit affected, the installment loan is not intended for a specific use, in other words, it is not intended to finance a particular project.
The borrower who benefits from this type of credit has free access to the capital granted to him by the bank without justifying the purchases or services carried out.
Installment loan: advantages and disadvantages
Certainly, installment credit offers the advantage of not being conditioned to a specific item of expenditure, but on the other hand it also offers some negative points. Here are some details on benefits and inappropriate for this type of consumer credit.
Advantages: unlike a mortgage, the installment loan does not come with a mortgage guarantee, which represents real savings in terms of costs.
For installment loans, the interest rates are always fixed, that is to say that the monthly payments and the duration of repayment remain unchanged.
Compared to loan to the classic consumer, the installment credit has great flexibility, the award criteria are very advantageous.
Disadvantages: the first disadvantage of this type of credit is its interest rate, it is higher than the rate of a home loan and its repayment period is shorter. This therefore translates into higher monthly payments.
Even with a large sum, installment credit does not give entitlement to the tax benefit ( tax reduction) since this loan is not accompanied by a mortgage guarantee.
The installment loan is an unrestricted personal loan, the agreement of which includes all the characteristics of the grouping of loans (the amount of the monthly payments, the interest rates, the repayment period, etc.).
The term “installment credit” is often used. In the country, we speak rather of revolving credit (formerly revolving). Its financing consists in taking out a new loan at a reduced rate making it possible to repay all or part of the outstanding amounts.
This form of consolidation of consumer credit is often without mortgage guarantee and can include various personal debts (car credit, personal loan, revolving loan).