Consumer credit facilitates the financing of many projects. But it is not always easy to find your way among the multitude of offers … and rates. Before taking out a personal loan, you must be aware of all the terms and especially the borrowing rates. Each interest rate is different, corresponds to a specific banking definition and has an impact on the amount of credit. Knowing the application of these rates can best decrypt an offer of consumer credit.
Credit Conso: The basic rate
It is of this rate that everything depends. As its name indicates, the base rate is used as a basis for the lender to calculate credits and offer the various offers to borrowers. Banks set the base rate amount freely while taking into account monetary agreements. The base rate also determines the amount of interest earned on investors and banks.
Loan conso: The rate of bonus
The enhanced rate is always lower than the market rate, but is not offered to all borrowers. Set up by the public authorities, the subsidized rate is granted for credits used to finance projects that are important for economic and social life. It supports projects that have a positive impact on the country’s development. The subsidized rate may, for example, be intended for farmers or the financing of social housing.
Pret CONSO: The conventional rate
The conventional rate, also called the nominal rate, is the rate determined by the contract between the borrower and the lender. It is calculated over a calendar year of 365 days and must be in writing to be taken into account. In case of dispute, if the conventional rate is not established in writing, the court chooses to apply the legal rate in force at the time of the judgment, and this for the rest of the credit.
Credit Conso: The TEG or the global effective rate
The overall effective rate is the rate that must be considered with the utmost attention when signing a consumer credit agreement. It includes:
• the borrowing rate;
• Ancillary costs such as processing fees, warranty costs and insurance.
Thanks to the overall effective rate, it is possible to calculate the total cost of credit. It is therefore the reference rate for borrowers, it allows them to compare the various proposals for consumer loans. The overall percentage rate must appear on the offer of consumer loan for the latter to be valid in the eyes of the law.
Credit Conso: The debtor rate
This is the interest rate applied to the borrowed capital. This rate may be fixed or variable, as stipulated at the time of signing the contract. It makes it possible to determine the amount of the interests of the credit as well as the amount of the monthly payments. It does not take into account the ancillary costs.
Credit Conso: The debt rate
The debt ratio corresponds to the portion of its income that a borrower devotes to the repayment of his credits. It is necessary to calculate it and to know it to ask for a new credit. As a general rule, banks or lending institutions cap the debt ratio at 33% to limit risks. Thus, a borrower can not have to repay monthly payments greater than a third of his income.
Credit Conso: The rate of the money market
The money market rate is a key indicator of the economic state of a country or market. This is the interest rate at which banks borrow and lend money to each other. It fluctuates according to the financial situation based on:
- Unemployment rate ;
- The state of international markets.
The money market rate is a variable rate that is based on the dynamics of banking operations. We are talking about average money market rates to discuss the monthly rate established in the money market. It is determined by the amount of daily interbank rates.
Credit Conso: The rate of war
The rate of attrition allows to legislatively regulate interest rates related to consumer credit. The Banque de France determines it every quarter. The rate of wear is a ceiling, set by law, which prohibits lenders to set a higher rate than the latter. This maximum rate is intended to protect the borrower and to avoid abuse by lenders. There is a different rate of wear for each credit category.