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What to choose between revolving credit and personal loan?

The choice between a revolving credit and a personal loan must depend on several factors, in particular the nature of the project to be financed. However, what is the difference between these two types of consumer loan? How to choose between these two formulas?

Personal loan and revolving loan: what's the difference?

The revolving credit and the personal loan are both subject to the legislation governing consumer credit granted to individuals. If these two formulas have in common to offer a great freedom to those who contract them, it should be known that major differences exist between these two types of consumer loan.

Namely that the personal loan is fully paid as soon as the borrower finishes paying the totality of the outstanding capital and the ancillary costs of the credit (application fees, insurance premiums, interest…). The personal loan contract ends with the last repayment. Thus, if the borrower wishes to finance a new project, he must again apply for consumer finance.

In the case of a revolving credit, a sum (reserve of money) always remains available even if the borrower completely reconstitutes the borrowed capital with the payment of maturities. A revolving credit agreement can remain open indefinitely.

How to choose between these two consumer loan formulas?

Namely that the personal loan is intended to finance mainly a well-defined project. The amount and terms of the credit are fixed upon signature of the contract. This formula is best suited to buying a car, financing a trip, carrying out work ...

Revolving credit, on the other hand, allows you to have a sum of money defined at the outset with the lending institution so that the borrower can use it when he feels the need. It is a sum of money available at all times. It is primarily intended for daily or occasional expenses.

Therefore, the choice between these two formulas must mainly depend on the nature of the project to be financed, but also on the amount to borrow since the amount borrowed is generally greater for a personal loan than for a revolving credit.

In addition to the amount needed to finance its projects, the choice may also depend on consumption habits. A person who plans his projects well in advance should logically opt for a personal loan while a revolving credit will suit a person who likes to seize the opportunities that arise.

Both formulas are eligible for the consumer credit consolidation

Namely that the consolidation of consumer credit is a banking operation that allows you to bring together several credits of various kinds in a single loan. Allowing to reduce the monthly payments of a borrower, to reorganize his finances in a sustainable way, to protect him , or to simplify the management of his finances with a single adapted monthly payment, the repurchase of consumer credit concerns both personal loans and renewable credits subject to eligibility.

In addition, since the Lagarde law of 2010, banking establishments are required to systematically offer a personal loan as an alternative to any request for a revolving loan greater than 1,000 US dollars. As a result, it is possible at any time to prepay a revolving credit and to replace it with a personal credit via a grouping of consumer loans.

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