In these difficult times, the prospect of a drop in income can make repayment of loans problematic. There are flexibilities, often provided for in contracts, that can be activated to avoid being suffocated financially.
In these times of the Covid-19 pandemic, the income of some may fall in the coming weeks. If partial or total unemployment is already a reality, what should you do when you have one or more credits outstanding? How to stop the infernal refund machine? The Professional Association of Credit Intermediaries (APIC), sent Monday, March 16, a letter to the government asking to take three measures urgently: suspend the loan terms for those who wish; lengthen the conditions precedent of sales compromises and loosen the constraints of credit agreements in place since the beginning of 2020.
Currently, banks are organizing to consider adjustments related to the current situation. Societe Generale says: “For our customers facing difficult situations such as short-time working, we will be flexible, in particular by allowing them to stagger their consumer credit and home loan installments at no cost”.
For its part, the French Banking Federation (FBF) specifies today, “to contact its banking advisor, preferably by telephone, e-mail or via the messaging of the mobile application or online banking site for examination of his particular case “. While waiting for possible exceptional measures, here is already what is planned in a normal period and that it is already possible to activate in order to stop the natural course of repayments: reduce the monthly payment and / or temporarily suspend the repayment of credit.
Lower your monthly payment
The first option regarding modulation is easy to implement. “In mid-March, it is just time to take this step to change the levies for, at best, early April, if not for May,” said Mael Bernier, spokesperson for Meilleurtaux.com. Most loan contracts provide for lowering the monthly payment within the limit of 10, 15 or 20% below the initial monthly payment.
“Often, it is a tunnel in which you can vary the monthly payment in both directions. For example: if this limit is 20%, it means that it can be increased by 20% and reduced by 20%. But beware, some loans only provide for upward modulation, for example, with a tunnel ranging from 0 to + 30%, “said Philippe Taboret, deputy managing director of Cafpi.
When it is possible to play the down modulation card, this action is carried out in a limited framework. By a set of “communicating vessels”, a lower amount reimbursed will lengthen the duration of the credit. However, the latter is itself capped. Depending on the brand, it should not increase by more than two, three or five years. “In general, the rule is as follows: impossible to extend beyond the initial term of the credit. The loan must therefore be at least three years of age or more in order to activate this solution, “specifies Philippe Taboret. In addition, the modulation is “often limited in frequency with a difference of two years between two modulations”, adds Mael Bernier.
If this solution breathes fresh air into suffocated budgets, it comes at a price. This change is, to date, the subject of a billing of administration fees, because it gives rise to the publication of a new schedule.
More efficient but also more rarely offered, the second option consists in asking the bank for a break in the reimbursements granted for at least three consecutive months without exceeding six or twelve months. “This back-up solution allows the repayment of the principal to be stopped while the payment of the insurance is maintained,” specifies Philippe Taboret.
Still, “not all credits combine these two flexibilities. It is better to dive back into reading the general conditions of your credit agreement in order to find out whether the planned cases and the conditions of application “, summarizes Serge Harroch, founder of Euclide Financing. These rearrangements of current commitments lighten the budget but increase the total cost of the loan.
Fewer solutions for consumer credit
Shorter and less burdensome in terms of maturities, consumer credit and personal loans sometimes have fewer solutions. “Any room for maneuver is contractual. You have to reread the loan contract and find the possible conditions relating to a situation, “said Sandrine Perrois, a lawyer with the Consumption Housing and Living Association (CLCV).
Sonia Vienne, head of personal development at BNP Paribas Personal Finance (Cetelem), recalls that “all of our consumer loans and revolving credits provide for possibilities of postponing or reducing the maturity within the limit of 30% . In mid-March, there is still time to ask for them to benefit from an implementation from April. ” Faced with financial problems in perspective and to avoid sinking without doing anything, it is better to warn in advance your creditor, namely the banker or the credit institution, to request a spread of repayments.