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Is accumulating loans allowed in France? – Challenges

According to the Banque de France, annual growth in consumer loans was 2.9% in the first quarter of 2022, with a total supply of 195 billion euros abroad. height contrasts with The current decline in the number of home loans suffering from high interest rates. According to the statistics portal Statista, nearly one in three French households has had at least one mortgage in place for more than twenty years. “At least one”, because it is already possible to combine several loans in France.

Is accumulating loans allowed in France?

French legislation does not provide for any restrictions regarding the accumulation of loans. In other words, it is possible in principle for an individual to get as many loans as he needs. This applies to all types of loans. Thus, it is allowed to combine several consumer loans, several home loans, or even several consumer loans and real estate loans among themselves.

The French borrowing system makes it common for an individual to take out several loans at the same time. In addition to dividing consumer loans and housing loans into two large families, this system distinguishes between earmarked and unearmarked loans in consumer loans. There are, for example, loans specifically intended for the purchase of a car (car loan, motorcycle loan), loans associated only with the implementation of construction work (business loan), personal loans that can be used for his choice .. Accumulated loans can be necessary for some individuals when they face several needs financing at the same time. For example, for the close purchase of a property, or to purchase a property that needs renovation, or even for the acquisition of a car combined with the need for cash (which can be financed with a personal loan).

What are the limits of stacking loans?

Loans are still accumulated within the limits of the conditions for obtaining them provided by each credit institution. The High Council for Financial Stability (HCSF), considered the French banking policeman, requires various lending institutions to ensure that the debt ratio of subscribers to new mortgage loans does not exceed 35%. Also called voltage rating, family debt ratio It is calculated by dividing all the expenses of the family by all its cash receipts, in order to have the share of income available to pay off the credit.

In general, it is understood that credit institutions do not grant a loan (whether real estate or consumer) if the family has a debt ratio higher than 33%. It is up to each institution to adjust their decisions afterwards according to the profile of different applicants. So in France it is possible to combine as many loans and the types of loans you want, as long as you have the ability to repay. In fact, you should always be aware that the loan obligates the subscriber to return the money. According to a report from the Credit Observatory, which dates back to 2009 and gives one of the few numbers on the subject, 3 million French families at that time used a home-buying loan and joint consumer credit.

What are the solutions for borrowers who have accumulated too many credits?

The risk of accumulating loans for an individual is that he finds himself in a situation of over-indebtedness, despite the requirements of the authorities to comply with the level of indebtedness of subscribers. To avoid reaching this point, people whose effort rate remains adequate can resort to credit consolidation. Increasingly, French families are asking for this process, and it consists in collecting all their loans into a single loan that will have one interest rate and one monthly payment.

Pooling credits can allow the debtor family to get a more interesting interest rate or lower monthly payments (or even both in periods of lower interest rates), so that they are more readable to subscribers, so that they can breathe better financially. While credit consolidation can be viewed as the opposite of loan hoarding, it can also allow the borrower to obtain additional financing. In fact, when the debt ratio allows, the accumulation of credits can be accompanied by a request for additional money (a new loan of a certain amount) that the individual can use for the project of his choice.

(by HREF Editorial Board)

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