In the case of a personal loan, who determines the interest rate charged? How to estimate the rate of your future credit, or get the best rate? Our explanations.
A framework imposed by law
The establishments are not free to charge the interest rates they wish, and must comply with federal consumer credit law (or LCC). Thus, it is the Confederation which decides the maximum admissible rate, under article 14 of the CCA. Until 2016, this rate was 15% for consumer loans. However, as of July 2016, this maximum interest rate decreased to 10%.
The rates offered by banks
Institutions offering consumer loans are free to charge the desired rates up to the maximum rate set by the Confederation. Concretely, the interest rate charged by banks depends on several factors, in particular:
- The solvency of the client: which depends on his budget surplus, in other words his ability to repay monthly after deduction of the cost of living.
- The good repute of the customer: which depends directly on the customer’s history (bad codes with the ZEK, history with the bank, etc.), but also on his personal situation.
- Liquidity requested: the interest rate fixed may thus depend on the amount and the duration envisaged for the loan.
Get a better interest rate
To obtain a better rate, it will therefore be a question of working to improve its solvency and its repute. Concretely, it will especially be necessary to pay attention to the following elements:
- Present your financial situation in an exhaustive manner: in particular do not forget to declare additional income, bonuses, gratuity, etc.
- Avoid making multiple requests: credit requests are generally registered with the ZEK. Making too many requests in too short a period of time can lead to incorrect registration with the ZEK.
- Pay your monthly payments on time: late payments can also be registered with the ZEK, and are in all cases registered with the establishment where you obtained the credit. If it is impossible to pay a monthly payment, it is better to notify the financial institution to arrange it rather than to decide to pay the following month with a reminder.
Negotiate your rate
In fact, it is difficult for an individual applying to a bank to negotiate the proposed interest rate. The bank will make a proposal with a given rate, and the applicant is free to accept or not. To be able to negotiate better rates, it is better to contact an agency or a broker. A credit agency will have the experience and relationships necessary to get you a better offer.