Revolving credit, also called revolving or reconstitutable credit, is a financial transaction the purpose of which is to provide you with an amount of money that can be used at any time on an account opened in your name. This loan is more flexible to use than other consumer loans. In fact, your available money reserve will be replenished over the course of your reimbursements. In this article, we will tell you all about revolving credit, from how it works to getting it.
What is revolving credit?
Revolving credit is a consumer credit which, like microcredit or student credit, is said to be unallocated. It protects your privacy because you do not have to disclose the reason for your loan and can therefore freely use the amount borrowed.
Revolving credit is for individuals who require a reserve of money from which they can draw according to their needs. From this reserve, you can use the amount you want, up to the amount made available to you by the lender. This available credit reserve is then replenished as and when your repayments are made.
You should know that if the product or service is not delivered or is delivered defective, the consumer is still required to repay his credit.
What are the terms of the revolving credit?
Revolving credit is a consumer credit.
It makes it possible to finance goods such as for example:
- A car ;
- Equipment for your home;
- The organization of holidays;
- The renovation of your home.
The amount of revolving credit is between 200 dollars and 75,000 dollars.
It can be attached either:
- Has a bank account;
- Has a credit card.
Then, to repay this credit, you will have to pay monthly payments.
The term of a revolving credit is one year renewable each year. Before proposing to renew it, the lending institution must verify that the borrower has not had a payment incident by consulting the file of characterized payment incidents (FICP).
How to get revolving credit?
From one lending institution to another, the amount that can be borrowed is not identical and the criteria for obtaining it differ.
The amount also varies according to the borrower’s profile of the applicant, ie his needs and his repayment capacity.
If several consumer loans can be combined, however, the totality of the borrower’s monthly credit payments must not exceed 33% of his income, in order to protect him from over-indebtedness.
Institutions offering revolving credit
It is possible to obtain revolving credit within different structures or to subscribe online.
As mentioned above, most banks offer revolving credit, whether in branches or online. It is also possible to turn to specialized credit organizations which, unlike the bank, will not ask you to open a checking account. Finally, the subscription of this type of credit can also be done directly in retail chains.
In all cases, we recommend that you only contact companies governed by the Insurance Code.
You can now use this simulator to obtain the best rates for your revolving credit or contact our team of Across Lender experts directly.
The requested documents
The lender must complete a dialogue and information sheet with the borrower in order to assess its creditworthiness.
For a credit amount greater than 3,000 dollars, the information provided must be confirmed by the presentation of supporting documents such as the employment contract or pay slips.
For a credit amount of less than 3,000 dollars, only the identity card will be requested.
As a reminder, you do not need to specify the amount of your resources.
Revolving credit rates
The annual effective annual rate (APR) lets you know the total cost of your credit.
He understands :
- The basic interest rate;
- Application fee ;
- The amount of borrower insurance.
You should know that the interest rate of a revolving credit is variable and thus goes up or down.
The interest rate must not exceed the prevailing usury rates. For example, the wear rates for the first quarter of 2020 apply up to:
- 21.07% for loans of amounts less than or equal to 3,000 dollars;
- 11.75% for loans of amounts between 3,000 dollars and 6,000 dollars;
- 5.71% for loans of amounts greater than 6,000 dollars.
The wear rates are revised each quarter by the Banque de France.
It is also recommended to look at the duration of the loan, the amount of monthly payments and the possibilities of postponement in case of financial difficulties.
If its subscription is not compulsory, do not forget to inquire about borrower insurance which can take over the repayment in the event of life’s hazards, such as disability or death.
How to repay your revolving credit?
Repayment of revolving credit begins when you use the allocated amount. The reimbursement relates only to the sums spent and not to the available reserve.
Since 2011, the law has imposed maximum repayment periods which cannot be exceeded.
These repayment periods vary according to the amount of the credit:
- 36 months for a loan whose amount is less than or equal to $ 3,000;
- 60 months for a loan whose amount is greater than $ 3,000.
In addition, a summary document of your credit situation must be sent to you every month by the lender.
In particular, it should mention:
- The dates of the statement and payment;
- The amounts of the due date and the reimbursements made;
- The rate of the period and the APR;
- The share of available capital;
- The total amount due.
Three months from the annual due date, the lender must inform you of the conditions of renewal of the contract and the procedures for reimbursement of the sums remaining due.
You should know that you can change the monthly payments. You can repay in one go or in advance without compensation to pay.