When taking out a loan, the credit agreement is the legal reference document for defining the relationship between the borrower and the lender. It is compulsory and lists all the terms and conditions of the credit granted. In order to obtain the funds, it is essential that both parties sign this contract beforehand. Each party must keep a copy of the contract after signing. The main purpose of contracting a credit request is to inform the borrower of the conditions for the prior offer of credit. We will detail the elements appearing in the credit contract as well as the elements to which it is necessary to be attentive before signing it.
Consumer credit agreement
The purpose of the consumer credit contract is to inform the consumer about the terms and specifications of the product offered by the lender. Even if the initial objective was to frame and clarify the offer proposed by the credit organization, it became more complex following the addition of new legal notices. However, even if it has become difficult to read for the uninitiated, it will prove to be shorter than the general conditions of Apple or Facebook. For information, a loan contract is approximately 10 to 20 pages.
The most innovative players offer online credit which allows them to send their supporting documents by scanning them and to make an electronic signature of the credit contract. Contracting an online credit application which saves a lot of time and gets the money faster.
Information present in the credit agreement
In order not to lapse, and to be recognized as credit, the credit contract must include the following elements, according to consumer credit law:
- Identity and address of borrower and lender
- Type of credit (revolving credit, personal loan, car loan, etc.)
- Credit amount
- Initial repayment period
- The amount, the number and the frequency of the installments
- APR rate and total cost of credit
In the case of revolving credit, these elements are not mentioned because the APR is revisable and the cost of the credit is dependent on the number of transfers made.
- Terms of the right of withdrawal
A withdrawal form must also be attached to the contract.
- Conditions for making funds available
- Prepayment and termination terms
The modalities of total or partial prepayment must be explicitly mentioned in the credit agreement. Please note that for consumer credit of less than € 21,500, there can be no penalties for early repayment of the remaining installments to be reimbursed.
An end of reimbursement period must also be included, even if the contract can be renewed during its lifetime.
- the presence of credit insurance if it is linked to credit (borrower insurance is optional)
- the address of the Prudential Control and Resolution Authority (ACPR) and that of the administrative authority responsible for competition and consumption.
How to get a loan contract
As we have seen, the credit agreement is essential and must be signed by both parties.
The credit agreement will be sent to the borrower by the credit institution only after the latter has studied the request and given its first agreement in principle. This first agreement does not mean that the credit is accepted definitively. It means that if the supporting documents sent corroborate the information declared in the credit questionnaire and the loan contract is returned dated and signed then the credit will be accepted. But the credit can also be refused by the bank when it had been accepted at first.
The credit contract is therefore a commercial proposal from an organization to a borrower. It is obtained after completing a credit application. As long as it is not signed by the borrower, it is absolutely not binding. It can be sent by post or by email depending on the credit organization. After signing, it is necessary to keep preciously the copy of the credit contract which is intended for the borrower, it will serve as the basis for any question that the borrower is asking and the basis for any dispute.
The credit agreement: compare before signing
A contract is not binding as such, it is the action of signing it which is binding. It is therefore important before any signature to have gone around the market in order to obtain the best credit. A small difference on the APR can have a real impact on the cost of credit depending on the amount borrowed and the duration of repayment.
The credit contract: when does it take effect?
By its terms, it defines the relationship and the obligations of the borrower vis-à-vis the lender and vice versa. It is therefore necessary to respect the different clauses.
The credit agreement takes effect when the following elements are respected:
- Credit agreement signed and dated
The contract with the terms which compose it has a limited lifespan. After receipt, it must in fact be signed within a reasonable time so that the proposed terms are still in force. The period of validity of the offer appears on the contract.
- After the withdrawal period has passed
The withdrawal period corresponds to the period after the signature of the credit contract which the customer can renounce. Once the period has passed, it is no longer possible to terminate the contract and its termination or possible questioning must take account of the procedure laid down in the contract. The withdrawal period for a credit contract is generally 14 days. However, as part of a credit allocated to the purchase of property, it can be reduced to taking possession of the property.
Home loan agreement
Information present in the mortgage contract
The elements to appear on the mortgage contract are largely identical to those appearing on a consumer loan contract. In addition to the items listed above:
- A clause that the borrower can dissociate from the offer of credit the choice of insurance with another organization
- For variable rate mortgage loans, the method and frequency of revising the APR rate as well as a document presenting the impact of an upward and downward variation in the rate on monthly payments and the cost of credit. The lender is obliged to inform the borrower of a change in the rate.
Dispute of his mortgage contract
For several years, it has been in vogue to dispute certain clauses of his real estate contract with the aim of recovering part of the interest paid. Lately, many actions have been taken in this direction to highlight an incorrect TEG rate, which most of the time did not include the completeness of the fees. Banks reacted to the scale of the phenomenon because, according to some media, almost half of the credit contracts were wrong. Recent credit contracts therefore better meet the standards in order to avoid future disputes.