Financial organizations differentiate two major groups of loans for individuals. Real estate credit but also consumer credit. The legislator brings numerous regulations in order to protect the consumer in each of these offers. In the subdivision of consumer credit, there are two subsets:
earmarked appropriations and unrestricted expenditure. In the first case, the sums borrowed are precisely listed with the credit organization. This is the case of a quote which determines the amount of the loan. In the second case, the sums are not allocated to a specific goal. This is a loan of a free sum with no specific objective. How to choose a loan correctly? How to determine the appropriate type of loan?This is the question that this article is led to answer.
What does consumer credit with earmarked expenditure mean?
A loan generally requires documents relating to the investment which motivates this loan. In itself, the banking institution which grants the loan seeks information on the requested amount and the final purpose of the credit. In addition, knowing the need reassures creditors about the nature of the credit and in fact reduces the risk, which therefore limits the price of this credit.
An owner who plans to carry out renovations brings quotes to his bank that determine the need for financing. The case remains the same for the purchase of a car. Once this amount has been assessed, the borrower asks his bank for a credit which, if accepted, will release the funds once the invoices are returned.
In a sense, this mechanism allows the bank to prove the reasons for the use of the borrowed money. However, this model seems more complex to administer because the borrower juggles between the sums he uses and the sums he expects to collect from his bank. In addition, the bank can refuse the amount of invoices sent for lack of visibility, which can make administrative procedures more difficult. In fact, this credit model requires more organization and mainly concerns large sums.
What does consumer credit involve without proof?
Consumer credit without proof seems easier to implement since it does not require a quote or even an invoice. This type of loan is perfectly suited to renovation work projects, for example, if the owner seeks to carry them out himself. Expenses are then allocated to the financing of materials. In the event that an owner tries to employ someone without knowing exactly the need cost of his work, the unallocated sums bring more flexibility into the budget. In addition, for a wedding, it is difficult to prepare all the supporting documents, which is why a credit without supporting documents is more adequate. However, this type of credit generally means a more expensive cost since it is not a credit with a specific objective.
The bank considers the risk higher and this ultimately affects the amount to be reimbursed. To do this, a loan of this type still requires administrative documents such as identity, income and bank statements to be granted. Stable employment and clear credit ratings can help guarantee the loan repayment to the credit institution.