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Revolving credit, advice and advice

A revolving credit is a special kind of line of credit. This is an envelope , left at the disposal of customers according to their repayment capacity and / or their conditions of resources, and usable in whole or in part . It is called revolving because the funds are replenished as repayments are made. For each monthly payment paid, part of the amount of the due date returns to the usable envelope of the revolving credit. So much so that we can constantly surf the same envelope, depending on our loans and our repayments.

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Is revolving credit really healthy to use?

Obviously, the envelope in question is not left available free of charge. The outstanding amount borrowed is subject to interest , the rates of which are for the vast majority of cases revisable and quite high. System flexibility therefore comes at a cost, and in some cases may prove to be more of a trap than a relief.

2 Indeed, in the event of a hard blow, and as long as our budget is already tight, the additional burden generated by monthly repayments will increase the household budget . The trap is to subscribe to a reserve of money to make ends meet, and to subscribe to a second to meet the needs related to the expenses generated by the first. Etc.

But since the procession of the Lagarde laws , implemented from January 2012, things have changed for renewable credits. Until then, no time limit was set in the duration of the repayment. The interest and insurance amounts being fixed, it was quite possible, with a monthly payment of $ 45, to repay only $ 1 of principal every month. This could extend the repayment periods indefinitely and made it an extremely expensive line of credit, as long as it was impossible for us to increase our monthly payment. Imagine having to replenish the $ 900 cash reserve at this rate. It would have taken 75 years !!!

Fortunately, now, and since these laws, the amounts used in revolving credits must be repaid over a certain period:

  • Amount less than $ 3,000: three years maximum
  • Amount greater than $ 3,000: five years maximum

This allowed better visibility on these somewhat special banking products. And greater protection for banking users as well.

Are there any advantages to having a cash reserve?

But revolving guns, although expensive and sometimes tricky, do not only have drawbacks . Quite the contrary. Not everyone has an envelope of several hundred or even several thousand US dollars like this. And what to do in the event of a failure of a household appliance? Or a serious breakdown on the vehicle? Or a school trip to pay? It is difficult to live without a refrigerator these days, and insurance does not always cover everything.

The revolving credit solution then simplifies life. Envelope is available. So we just have to use the funds that we really need, and then repay this borrowed amount over several months. This allows you to control your monthly budget . In this sense, a revolving credit is much more responsive and practical than a classic amortizable loan . First, because the funds go directly to their destination and do not require any justification. Second, because an amortizable loan requires that all funds be released before even starting to repay. Major temporal and administrative drawbacks that cannot be found in money reserves.

Another point highlighting the flexibility of these financing products is the immediate consumption, the crush, the opportunity to be seized. Once again, it is not always obvious that we have a large sum in our Bank account that can be released with the snap of our fingers. This is why banking establishments have set up the possibility, via an option most generally, to back a credit card to a revolving credit. So if you finally find the item you've been looking for for so long, if you stumble upon the opportunity of the century, you don't find yourself financially deprived . A simple passage of the credit card, a credit payment, and it is the reserve of money that will be charged against the sum. In fact, you will not have to suffer any immediate consequences on your budget, no more than bank charges or fees on your current account. You are free to calibrate your envelope reconstitution time afterwards. It is this duration that will dictate the amount of your future payments.

The last interesting point in this type of operation is that it is possible to fully reimburse the sums used, in one go, and without penalties , when we want. The good deal or the unexpected happened on the 15th of the month? Once the salary is received on the 30th, nothing forbids you to settle the revolving credit. And here is another point often very complicated to negotiate on amortizable loans.

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Revolving credit, comparisons between banks.

Throughout these pages, we have chosen to dissect with you seven renewable credits, coming from seven different establishments . You will notice, as you read, that these banking products are very similar, even between competing establishments. The differences from one revolving credit to another relate to the height of the rates, the maximum amount of the envelopes, or even on the backing to a bank card or not.

For starters, you will see that the Bridgepayday revolving credit, from the Bank Popular, and the Izicarte , from the Savings Bank, are exactly the same products. All the conditions are scrupulously the same. Nothing unusual about that when we know that these two banks are now part of the same banking group, called BPCE. Even the descriptions and examples on the two sites are strictly the same.

But among the establishments 9 banking services, these two are not necessarily the cheapest. Crédit Agricole's Atout Libre , or the Bank Postale's revolving credit, provide their customers with much lower rates . In fact, only the LCL seems much more expensive still. We say "seems", because the scales of this Bank, a subsidiary of Crédit Agricole, are not listed anywhere. We therefore relied on the example highlighted on the product page to decide. And with a rate of almost 20% which can be revised for a repayment period of 3 years, it is indeed the most expensive. This is not necessarily surprising and remains consistent with the general guideline of the LCL regarding its fees.

How are these banking products really structured?

On the other hand, we looked at two finance companies; Cofinoga and Paydaynow. There are many others (Financo, Cetelem…), but these two are quite representative of what can be found on the market. On the one hand, Cofinoga offers us a cash reserve alone, capped at $ 6,000. On the other hand, Paydaynow associates a credit card with it , as banks do, but also caps its usable envelope at $ 6,000. Let us not forget that Paydaynow is owned by Crédit Agricole, while Cofinoga is a subsidiary of Laser, itself 100% owned by the BNP Paribas group, as is Cetelem for that matter.

In the end, and whatever the organization offering a loan, tell yourself that there is a good chance that it belongs to a large financial group among the following: Crédit Agricole, BNP Paribas, Société Générale, BPCE or Crédit Mutuel . And what goes for lines of credit also goes for online banks, or other financial companies.

In the other pages of the site, we will focus on more on revolving credit itself than on the banking institutions that are able to offer it. How to terminate a revolving credit ? Can we make a reliable simulation from home? How to get revolving credit quickly ? What are the different cards associated with revolving credits? What are the advantages ?

These are all questions to which we have endeavored to answer, as precisely as possible. Because indeed, as it is quite simple to calculate and obtain the quantified information concerning a depreciable loan, as the calculation of the maturities of a revolving loan turns out to be much more complex. In fact, the calculation methods are very different. And the fact that a partially used envelope can both be used again and despite everything being reconstituted, does not facilitate the task.

Finally, we will discuss just one fact. Note that this type of loan, which could be described as rechargeable, is not a French exclusivity. Far from it even. In addition, the same mechanism may also exist on larger loans, including loans relating to real estate. These are then referred to as rechargeable mortgages . Some Anglo-Saxon banks have made it a specialty.

The principle of this type of loan can be extremely practical, flexible and responsive; and at the same time, very expensive, even dangerous. Everything is a question of anticipating your budget , and the time taken to use the reserve. It is really on these two points that the total cost linked to these revolving credit operations is played out ...

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