To help individuals finance the many works likely to improve or renovate their main residence, banks and credit institutions have a wide range of ” work loans “, which can take the form of restricted loans or loans. personal. In all cases, it is recommended to multiply the work loan comparisons and simulations to obtain borrowing conditions as favorable as possible.
How does a work loan work?
Within the framework of a works loan, the bank or the credit organization lends a sum of money of a certain amount to an individual who wishes to carry out, in a property owned by him, essential works ( repair of a roof, anti-fungus disinfection, etc.) or comfort (conversion of the attic, new kitchen, wine cellar, etc.).
This loan can be granted for a primary residence as well as for a secondary residence or rental property.
The works loan is considered as a conventional consumer credit : it is therefore subject to the same rules concerning the withdrawal period of fourteen days or the terms of early repayment of a credit (no penalty below $ 10,000 reimbursed per year).
What are the characteristics of a work loan?
As with any other consumer loan, the main characteristics of a work loan allow quick comparisons between different offers.
There is a very wide variety of work loans, each financial institution having its own promotional offers in this area. Depending on the scale and cost of the site, the amount loaned can start from $ 1,000 and reach fairly high amounts, especially in the case of the complete renovation of a dilapidated housing.
Legally, the works loan can reach a maximum amount of $ 75,000 . If the amount of work is higher, it is advisable to move towards a conventional mortgage. The nominal rate of credit, likewise, is likely to experience very large variations depending on the profile of the borrower and the type of loan requested, and ranges from 4% to more than 10%.
The overall effective rate (TEG) of the credit takes into account all the costs related to the loan, from its subscription to the very latest maturity: this includes of course the interest paid according to the nominal rate, but also any application fees and insurance costs if the latter is offered by the lender himself. To compare the cost of several credits, it is therefore necessary to take into account only this simple and universal criterion.
Credit can be subject to a fixed or variable rate . In the first case, the amount of the monthly payments is known in advance and with certainty, until the last due date. A variable rate, generally indexed on short-term interbank loans (Euribor 3 months), allows you to start borrowing with a lower interest rate, but puts you at risk of paying more later if ever the rates go up. In view of the current economic situation, it is very often recommended to opt for a work loan at a fixed rate.
Borrower insurance is not compulsory for a work loan. However, minimum cover (disability and death) will often be offered by the lending organization itself or may be judiciously taken out with a third-party insurer, all the more if the sums involved are significant.
When should you choose a work loan?
The work loan is suitable for all renovation, improvement or enlargement projects of a house or apartment. It can be work carried out on a main residence, a secondary residence or even on rental property. Thanks to variable terms, the works credit adapts to all projects:
- enlarge the accommodation by creating an additional room, for example when a new child arrives;
- renovate part or all of a dwelling : redo paintings, electrical installations, plaster, etc. ;
- improve living comfort : build a garage, a terrace, dig a swimming pool…
There are an almost infinite number of possibilities for using a work loan. Its flexibility means that it has been chosen by many property owners.
If the work aims, among other things, to improve the diagnosis of the energy performance of the housing or to install more ecological equipment (wood boiler, heat pump, double or triple glazing, etc.), it should be noted, however, that the cost of the loan may be largely offset by various subsidies or tax advantages, such as the energy transition tax credit.
What can be included in a work loan?
Before taking out a works loan, it is important to take an interest in the different types of existing loans, as presented below. In fact, some work loans are said to be “unallocated”.
With these “unrestricted” loans , it is not compulsory to provide supporting documents when requesting release. This type of loan, although generally more expensive, can therefore be highly recommended when the owner is unable to provide invoices (work done himself for example) or if he wishes to finance something other than work at strict sense of the term.
In fact, in an assigned loan, it is essential to provide invoices and, moreover, not all of them are eligible. Thus, the majority of banks refuse to release funds for the acquisition of household appliances (dishwasher, washing machine, oven, etc.) or for the purchase of DIY equipment (drill, jigsaw, circular saw, etc.).
On the other hand, an assigned works credit makes it possible to finance all types of works (swimming pool, extension of the living space, renovation, etc.) at a more advantageous rate.
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Work loan simulation: how to proceed?
Your work project is budgeted and you want to borrow all or part of the amount? Obtaining several simulations makes it possible to compare the conditions and the amount granted by the various financial institutions . To do this, you can go to your usual contact, your bank advisor, or to online simulators, which allow you to quickly and easily access many offers.
To simply compare two work credit proposals, referring to the APR is generally recommended.
For example, if you borrow the sum of $ 10,000 over a period of 3 years, the monthly payment to be reimbursed will be $ 288.88, to which you will have to add the amount of borrower insurance, if applicable.
Depending on the amount you need and your financial capacity, the duration can be adjusted up or down. You also keep the possibility of making a partial or total prepayment at any time, with any type of work loan.
What are the different types of work credits?
Depending on the nature of the project and the personal preferences of the borrower, several forms of consumer credit can be used to finance works. Unallocated personal loan, assigned credit or revolving credit: which work loan to choose?
Unallocated personal loan
A personal loan allows the borrower to receive the capital without having to justify its use . It is therefore a much more flexible option than an earmarked loan, which may in particular be suitable for individuals who are a little DIYer and who intend to carry out the work themselves and therefore will not be able to present a professional quote.
A work loan can take the form of an “earmarked loan”. The sum, in this case, must be specifically earmarked for carrying out the planned works . The lender is also entitled to verify this by being presented with quotes drawn up by professional companies . This form of credit comes with a number of advantages, including greater protection in the event of default by the contractor (the possibility of canceling the loan is often provided for in the contract, under certain conditions).
In addition, the loan must be obligatorily allocated if it is envisaged to back it up to a zero-rate eco-loan.
It is theoretically possible, finally, to charge the amount necessary for the work to a revolving credit, that is to say a reserve of money permanently available and which is replenished over the repayments. This solution is certainly more practical and quick if the borrower already had this reserve of money before, since he then does not need to carry out any other formality or request for a loan.
However, it should be avoided as much as possible, since interest rates are much higher!
Are there state aids in addition to the works loan?
Depending on the type of work you are considering and your personal situation, different devices can be added to a work loan, particularly when the renovation affects the energy performance of the home. In the table below, simply discover the main aids you can claim for your work project.
The various work assistance systems
What are the work loan organizations?
Do you want to take out a work loan? You are spoiled for choice: many lending organizations compete in this market, and this competition is beneficial to you.
Indeed, promotional rate offers appear regularly. It is possible to turn to conventional banking establishments , but also to online credit organizations , which offer their services on personal loans, assigned credits or revolving credits.
How to find the best rate for a work loan?
In order to find the best interest rate for a works loan, the APR comparison must be carried out. Also check the other characteristics of the work loan such as the amount of the loan, the duration or the borrower insurance formula is essential.
Loans for carrying out works constitute, together with car loans, one of the most widespread forms of consumer credit. In view of the plethora of offers available on the market, it is recommended to entrust the search for the best conditions to a specialized broker .
The latter will present your file to a large number of banks and credit organizations, and put them in competition to present you the most interesting offer, by taking a low commission in the process.