When you already own a property or are about to acquire your main residence, it is extremely common to need to carry out work. They allow you to renovate an apartment, rehabilitate an entire home, expand a house to enjoy a new living space, build a baby’s room or even accommodate a swimming pool in the garden.
Generally, the work loan is granted by the banks in the form of a consumer credit. We commonly speak of “assigned loan”, since the purpose of the loan is to finance a project determined upstream. But what are the advantages and disadvantages of the various existing work loans? Up to what amount can they be subscribed?
Work loan, a practice regulated by law
There are still ten years, the credits for works were granted only within the limit of a rather low amount, of the order of approximately 20,000 euros. But the needs of the French evolving in terms of comfort, the amount of loans granted was no longer sufficient and their conditions were no longer sufficiently secure.
This is why in May 2011, the Lagarde law reformed consumer credit, of which the work loan is part. Individuals and SCIs (Civil Property Companies) can now borrow up to 75,000 euros to carry out work in their accommodation.
The Lagarde system offers better protection to consumers. Indeed, the latter has all the advantages of an affected loan, including a withdrawal period of 14 days, an offer issued with the obligation to communicate the APR (annualized global effective rate) and protection towards craftsmen in the event of loan refusal.
However, be careful with its duration, the work loan is most often granted over a period of ten years, and can in no case exceed twenty years, even for large amounts, unlike the mortgage which can be spread over thirty annuities.
The estimated amount of the work is greater than 75,000 euros, what should be done?
It may be, especially when buying old property, that the envelope you need is well over 75,000 euros, if you have to rehabilitate a barn of which only the walls remain for example.
In this case, it is up to you to precisely quantify the amount of your mortgage. Indeed, it is possible toinclude the work loan within the main mortgage loan, with no other amount limit than that imposed by your borrowing capacity.
The advantage is that you will then benefit from a more attractive rate, reserved for mortgage loans. In return, you will have to justify all the work carried out, by sending the quotes to the subscription and the invoices for each release of funds.
In other cases, you will resort to the unallocated personal loan. You will therefore not have to justify the work carried out. Although this type of loan is more flexible, it is also more expensive, and less protective …
What to choose for your work, the affected or unaffected personal loan?
The advantages and disadvantages of the affected work loan
The assigned work loan responds to your request within the limit of 75,000 euros. It is very protective and you will be able to cancel planned jobs if you do not get it. Likewise, if the work ultimately costs less than expected, you can pay off your loan under favorable conditions.
On the other hand, you will always have to justify the work carried out on presentation of invoices. And unfortunately, not all banking institutions show the same flexibility. While some banks grant a decoration budget or allow you to do the work yourself, others refuse. Choose your financial institution well according to your real needs and your aspirations.
The advantages and disadvantages of the unaffected personal loan
The personal loan is very flexible. It can be used to finance your next vacation, the purchase of a home cinema or the realization of real estate work. You do not have to justify anything to the lending institution, except your income and your repayment capacity.
On the other hand, an unaffected work loan does not secure your project and you will have to repay it in full. If you borrow 20,000 euros when the work ultimately only costs you 15,000 euros, you will not be able to terminate the loan or request a postponement of deadlines, for example.
Whatever your choice, don’t forget that a loan commits you: take the time to think it over, in particular by comparing the loan offers between them …
Find the best work loan up to 75,000 euros
You have decided to expand your home, change the paint, redo the insulation or install a veranda to enjoy the outdoors, you now need to find the best loan for work. It doesn’t matter whether you opt for affected consumer credit or not, the best deal will be both the most flexible and the lowest total cost.
To compare works credit offers quickly and free of charge, use the online simulators. Reliable and without commitment, they will inform you about the feasibility of your project before you start. Finally, they put you in touch with the loan organizations offering you the most attractive formulas and the lowest rates!