Know the real cost of your credit to better reduce it!
Parts of a Credit
To begin, you should know that a credit is divided into 3 main parts:
- The capital
- the interest rate
- ancillary costs
1. The capital
As part of your credit, this is the total amount that the lender gives you and that you (of course) have to repay. When you claim a credit, this amount must be invested in a housing project and then be repaid over a period longer or shorter in the form of monthly payments. This is called an “affected” loan. When you start the repayment of the capital and you only have a part left to return, we talk about capital remaining due. That is, literally what you have to pay back at a moment ‘t’. To summarize, we can say that capital is the amount you need to carry out your project. But beware! You are not going to owe the bank “that” the amount requested to make your acquisition…
2. The interest rate
It applies to your loan is simply the remuneration of your bank for its service rendered. It is defined according to three main criteria:
– the type of credit granted
– the repayment period of the loan
– and the risk taken by the bank by granting you a loan.
This rate varies more or less depending on: the economic situation, the monetary policy of the European Centrum Bank for example. It also depends on your profile and your ability to negotiate with your advisor.
3. Ancillary costs
Finally, they are composed of several sub-layers among which we find: insurance, fees, potential prepayment penalties and guarantees taken by the lending institution.
This last part concerning ancillary costs is very important because it is thanks to it that you can lower the overall cost of your credit!
The share of insurance in your credit.
When they grant you a loan, banks systematically offer you the subscription to a death-disability insurance. Its cost has been rising steadily for years, now reaching new highs and considerably increasing the cost of your loan. According to the methods of calculation of the price the banks announce a percentage on the total sum borrowed or on the starting capital with a repayment pro rata of the sum remaining to refund. Hard to navigate in this ocean of numbers! But be aware that for example for a loan of 300 000 €, if the bank announces an insurance cost of 0.50%, it still represents 1500 €, a nice sum!
Play the competition to lower prices.
To succeed in reducing this amount, one solution: the delegation of insurance. Since the Lagarde law came into effect in 2010, you are free to choose a provider other than your bank to insure your loan. On one condition: Your contract with another insurer will have the same guarantees as the contract offered by the lending bank, but this is not usually a problem.
What the Mahon law has changed.
On July 26, 2014, the Mahon law came to shake up the world of loan insurance, now offering the possibility for borrowers to change loan insurance whenever he wants. No need to wait until the minimum period of 1 year until then in force. Today, thanks to this law, there is no obstacle to prevent you from playing the competition and thus lower the cost of your insurance.
How to find out if you can save?
To know all the modalities of a change of insurance contract and to know the amount that such an operation can save you it is enough to realize a simulation online, fast, free and without commitment.