Non-business loans: consumer credit

Moni light! Mè yéga soldat! It's time you learned from your mistakes and stopped repeating them. It's time to make offerings. It's time for you to give. It's time to plow. It's time you pulled up the chaff. It's time you talked about your mistakes and showed others how to avoid them. It's time to humble yourself and look at those behind you. It's time you remembered Jonathan's sons (2 Samuel 9:7). It's time you met the daughters of Zelophehad (Numbers 27:7). Behold, a king departs. Behold, a queen lays down her crown. Behold, a young mother seeks you. Behold, a youth is watching you. "This is the answer they gave us: 'We are the servants of the GOD of heaven and earth, and we are rebuilding the temple that was built long ago. It was a great king of Israel who built and finished it." (Ezra 5:11, Segond 21)

1. Consumer credits / loans

2. Points of attention and advice

** Moni = Hello in Chewa / Chichewe (Malawi)

** Mè yéga = Hello and Thank you in the Bassa language (Cameroon)

❖" The rich rule over the poor, and he who borrows is slave to him who lends." (Proverbs 22:7, Segond 21)

❖" Do not be among those who make commitments, who stand surety for debts: if you do not have enough to pay, why would you want the bed you lie on to be taken away? "(Proverbs 22:26-27, Segond 21)

❖ " Take care of your affairs outside, Make your field ready, Then you will build your house." (Proverbs 24:27, LSG)

❖ " The prudent man sees evil and takes cover, but those who lack experience go ahead and suffer the consequences." Proverbs 22:3, Segond 21)

 1. Consumer credit

The previous article introduced home loans. If you haven't read it yet, I urge you to do so. Consumer loans, or crédit conso, loans granted for any expenditure or investment other than real estate. They are used to purchase goods or services, pay expenses (education, healthcare, events), or provide liquidity. Consumer credit is either assigned or unassigned. Affected credit is intended for a specific use, determined at the time of contracting. Unrestricted credit has no specific purpose. The borrower is free to choose how to use it. Certain loans are granted on advantageous terms (interest rate, grace period and repayment period).

Consumer credit :

• Earmarked credit: granted for a specific purpose. The capital cannot be used for anything else. The borrower must enclose a quotation or invoice with the credit application. Often, the sum lent is paid directly by the lender to the vendor or service provider.

  
  

• The home improvement loan: This is an assigned loan, designed to home , decoration, repairs and other small jobs. Repayment can be spread over a longer period than usual consumer credit. Like a home loan, it is repaid by amortization.

  
  

• State-guaranteed student loan (in France): This is an allocated loan, available subject to certain conditions. It enables eligible students under 28 to apply for a loan to finance their studies, without having to provide the bank with a guarantee from a relative or proof of income. To date, the maximum loan amount is 20,000 euros. Banks may refuse to grant the loan, despite the state guarantee, if they consider that the student will not be able to repay the sum requested.

• Government student loans (Canada): As Canada is a federal state, conditions are specific to each state. In short, eligible students (those who meet the conditions) can obtain loans from the Canadian government to finance part of their studies. The loan is granted at a below-market interest rate (interest rate set by the state).

• Unsecured student loans: It's no secret that the United States is the country with the highest rate of student debt and over-indebtedness. It's also the country with the longest repayment periods, up to 25 years (unimaginable in Europe). Interest rates is freely determined by the lending institution. The higher the school's ranking, the easier it is to borrow a large sum and, above all, to negotiate the interest rate.

  
  

• Personal loans are free to use. No supporting documents are required. The duration and amount are pre-defined and cannot be modified.

  
  

• Personal microcredit: reserved for people excluded from the conventional banking system. The sum loaned is intended to purchase a good or service that will improve the borrower's situation (in the short or long term). The microcredit rate is set by the lending institution (associations, banks). It may be unsecured or guaranteed by an association, the State or a social enterprise.
  

• Revolving credit: This is a sum made available, a reserve of money, which the customer or borrower can use according to his or her wishes and needs, up to the limit set by the bank. The reserve is replenished as repayments are made. Interest is calculated only on the amount used. The interest rate is variable.

  
  

• Bank overdrafts (authorized and unauthorized) : It is treated  a revolving credit. This is a maximum loan amount, granted by a bank for a given duration (in days).
  

• Overdraft facility and free credit or payment in instalments without charge: Payment in instalments without charge is free credit granted by a merchant, bank or payment service company (e.g. PayPal). If the repayment period is less than or equal to 3 months, it's an overdraft facility. Otherwise, it's a free consumer credit.

• A store's payment or credit card: These cards enable you to pay for purchases on credit or cash and, where applicable, benefit from loyalty advantages. These can be small personal loans, revolving credits, overdraft facilities or free credit. Contracts last between 3 months and 1 year.

• Lease with option to purchase / rental with purchase option / Lease purchase contract : widely used to purchase cars, smartphones and robots. The borrower rents an asset from the lender for a set period, making monthly payments. On the specified date under the terms of the contract, the borrower can choose to purchase the asset at the price agreed in advance, or return it to the lessor. The lender is not a bank. Very often, the lender associated with a bank or the bank of the group to which it belongs.

• Overdraft facility and free credit or payment in instalments without charge: Payment in instalments without charge is free credit granted by a merchant, bank or payment service company (e.g. paypal). If the repayment period is less than or equal to 3 months, it's an overdraft facility. Otherwise, it' a free consumer credit.

4. Points of attention and advice

🙂 Remember the points below.

• It cannot be said enough: borrowing should never become a habit.

• If you're over-indebted, get help. The sooner the better. Fees and interest can amount to 15% of the total or more than 30% of the amount owed.

• Trust in GOD in all circumstances. Don't put off until tomorrow what GOD tells you to do today.

• You will compare yourself to no one. Thou shalt envy no one. Thou shalt not despise anyone. Thou shalt not covet or envy. Thou shalt avoid false humility.

  
  

• Personal loans are always better than revolving credit. You'll avoid bank overdrafts and revolving credit. The interest a personal loan is calculated monthly at a fixed rate. Revolving credit interest is calculated daily at a variable rate. Don't play the trader if you're not a specialist.

• 🙂 care to analyze total cost of borrowing (total interest, principal, insurance and other costs).

• Read the repayment schedule and check if you are entitled to a one-month grace period.

• If you have to take out a student loan, borrow at a fixed rate.

• If you have to borrow, don't borrow everywhere. A credit redemption or loan from a single establishment will always be better than two consumer credits from two establishments. Borrowing easily doesn't mean borrowing wisely. You can borrow from several banks, and that's a good thing. When it comes to consumer credit, however, it's best to borrow from a single institution.

• For your home loan, you'll compare several banks (amount, interest rate, insurance costs, term). If you're not a finance specialist, you'll borrow at a fixed rate. If market rates fall, renegotiate with another bank if necessary. If market rates rise, you won't be affected.

• Find out about any tax advantages before you decide.

• Remember, your bank advisor works for your bank, not for you. He may be friendly, well-intentioned, a former student at your school, a member of your church or your brother-in-law, but that doesn't change the fact that he is a bank employee.

• If you are accompanied by an asset manager, don't sign anything without understanding and comparing it with your bank.