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Loan Insurance: The French know the device

Who said that the French were badly informed about loan insurance? A recent study led by TNS-Sofres on behalf of the French Banking Federation (FBF) in any case bends the neck to this idea. The proof in figures: 83.5% of respondents state that they know the principle of the credit insurance and the interest it presents.

The law is also not an unknown for households.

The law is also not an unknown for households.

Introduced in 2010, this scheme allows borrowers to choose a credit insurance other than that offered by the lender (this is referred to as insurance delegation). An alternative known by 85.5% of households that have taken out a credit from 2010. This proportion drops slightly to 84.5% for those who consider a loan within six months.

And to the question of how households are informed, the majority of them respond via banks or their relatives (34% both), in front of the press (31%).

The majority of borrowers accept the offer of their bank

The majority of borrowers accept the offer of their bank

Despite this degree of information on the subject, the French do not seem to plebiscite the delegation of insurance. Since 2010, only 37% have tried to negotiate another insurance-borrower. An approach that they perform, moreover, very early in their project (52% at the beginning of their real estate research, 43% before the loan signature).” This allows them not to encounter difficulties in terms of time,” says the FBF.

Mechanically, from the moment a minority of borrowers take the steps for the delegation of insurance, it is logical that the subscription of this type of contract does not meet, either, a great success. The proportion of borrowers who opted for the insurance delegation – in 8 out of 10 cases, for price reasons – drops to 21%.

They are 79% to have accepted the insurance offer of their banker. The reasons given? The borrower’s confidence in his banker, the” quality of products offered [which] is better”, the simplicity of the approach and” competitive rates”.

For the FBF, the CMO’s findings coincide with those of the Inspectorate-General for Finance (IGF), published in November 2013, which recognized” the effectiveness of the French insurance-borrower model”. Understanding:” opening the door to a cancellation in the months following the subscription of the mortgage or an annual termination would endanger an open, competitive and efficient system, which today benefits the greatest number of borrowers”. A reference to the law, now debated in the Senate, which could authorize borrowers to terminate their insurance contract after one year.

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Ways of securing consumer credit

In the vast majority of cases, banks do not expect collateral for consumer credit. However, it may happen that in a given case they decide to apply security. So the question arises what are the currently used methods of securing consumer credit. What can banks have today in this case?

Guarantee

Guarantee

Currently, the most frequently chosen method of securing consumer credit. This type of collateral is chosen by banks when the borrower does not have high creditworthiness. In the case of a surety, a third party agrees to repay the liability when the borrower stops doing so.

Credit insurance

Credit insurance

In this case, part of the risk associated with the repayment of the loan is taken over by the insurance company. If the insurance premiums are paid regularly, the insurer takes over the obligation to pay the bank if the loan is difficult to pay. Without a doubt, this is a very good form of consumer credit insurance that really gets charged.

Bill of exchange

Bill of exchange

It is nothing else but a kind of promise that a certain amount will be repaid on the given date. In the case of collateral for a loan, the promissory note has a blank form. The amount of space remains empty. The bank enters it itself, depending on the outstanding debt.

Bail

Bail

The contract specifies the amount to be paid to the bank. If we do not pay our debts on time, the deposit will be taken over by the bank to cover the liability. In the case of repayment of subsequent installments on time, the deposit will be returned to us after the end of the loan period. Many specialists emphasize that this is a really good way to secure the loan.

These ways of securing credit for consumer loans are not used very often. This does not mean, however, that there is no bank that decides not to use collateral. After all, banks are doing everything to defend their interests as well as possible. And security is just one way.