Revolving credit

The revolving credit or credit revolving is a form of Crédit consisting in placing at the disposal of a borrower an amount of money on an open private account near the dispenser establishment of this credit, in a permanent way and with which it can finance the purchases of his choice. It constitutes a particular formula of consumer credit and raises consequently of the related regulation there.

The renewal of the revolving credit progressively takes place refundings of the borrower within the limit of the amount authorized by the organization and to the amount of the refunded part. This formula of credit is generally supplied with a credit card usable in the network of the affiliated trade which accept this chart. If this formula has the advantage of the flexibility, it is generally expensive, can constitute a dangerous incentive with the Surconsommation - even with the Surendettement - and thus requires a perfect management of its account.

The success of the revolving credit rests on an important and durable request for appropriations of small amounts, emanating from many and solvent customers in the majority of the cases.

This form of consumer credit caused various criticisms of the share, in particular, of consumers' associations which blamed its role in the over-indebtedness of the households. The slip which one observes of the appropriations assigned towards the nonaffected appropriations deprives, indeed, the borrowers of the protections attached to the contractual assignment.

Principle

Credit “reconstituable”, it makes it possible the borrower to lay out, freely and permanently, of a certain amount of money.

The amount thus available - sometimes called “reserve” - progressively reconstitutes each month refundings carried out, within the authorized limit.

Types

This credit can be practiced under one and/or the two following forms:

the “ credit line ”: the credit is connected then with an authorization of renewable overdraft, related to the bank account of the borrower and this one draws then from the capital reserve which is authorized to him, either by check, or by transfer;

the credit card : the revolving can indeed be coupled with a bank card, a privative chart of purchase emitted by certain department stores, or a specific credit card emitted by certain financial institutions.

Amount

The amount of the credit is function of the incomes, other possibly contracted appropriations and relation of the customer with his banker. It generally lies between 2 and 3 times the monthly net income.

Duration

The duration of the contract is limited to 1 year (renewal by renewal by tacit agreement). Three months before the date “birthday” of the opening of the account, the finance company must obligatorily give to the borrower an offer of renewal (stop of the first civil court of the Court of appeal of the September 18th 1998); moreover, the increase in the lent ceiling must be the offer object new of credit (stop of the first civil court of the Court of appeal of the March 17th 1998, Miss S.C Finaref).

Interests

The interests are deducted on the sums remaining due at the end of each month. The TEG - in other words, the Rate global manpower - varies between 10 and 18,08%.

Guarantees

The subscription of a life insurance and disability is generally necessary.

Refunding

The rate/rhythm of refundings is left with the choice of the recipient within the limit of the respect of a monthly minimum.

As for any redeemable credit, each monthly payment breaks up of two parts:

first as an aim the payment of the interests has on the actually borrowed capital, second as an aim the refunding of part of the borrowed capital has. Advance payment, partial or total, possible constantly, without penalties.

Protection of the borrower

Being one consumer credit, of the particular rules, aiming informing and at protecting the consumer, apply to the initial contract:

offer preliminary of loan, in particular specifying the maximum amount of the credit, its total costs, the conditions and the cost of the possible insurance, time for consideration 15 days at least, to allow the borrower studied the terms of the contract, and time of 7 days retractation once the preliminary offer of loan signed, lasting which the borrower can still retract.

See too

Means of payment

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