The loan works in France
The loan works, or credit work, is a type of consumer credit (Article L311-1 4 ° of the Consumer Code), that is to say a provision of money by financial institutions (banks, online banks or lending organizations) to individuals to finance their purchases of goods or services. When he contracts a loan, the individual becomes a borrower and the financial institution becomes a lender. The loan works is a solution to finance the realization of work within a house. It is intended for the realization of constructions (terrace, swimming pool…), renovations, enlargements or even insulation.
Conditions for obtaining a work loan
These conditions are common to all work loans.
First, the borrower must be the owner of a principal residence (Article R 318-7 of the Building Code defines a principal residence as the residence inhabited at least 8 months in the year by the borrower ), a second home or a rental property. Then, he has the choice to turn to three organizations allowing him to take out a loan work: a bank, a broker or an aid agency.
If the borrower decides to turn to a bank, he must, before applying for a work loan, determine the cost of the work to be done. The bank will look at whether the borrower has already borrowed, and determine the maximum it can lend for the completion of the work. She will also observe if the works will increase the value of the property.
If a borrower chooses a loan from an aid agency, the borrower must first verify that the organization is approved by the government through an agreement between the aid agency and the charity. ‘State. There are many types of work loans for people in need.
In all cases, the borrower can either decide to carry out the work himself within his home, or to have them done by a service provider.
If the borrower decides to resort to a provider, he must first choose before applying for a loan work. For this, the provider must be registered in the Register of Commerce and Companies (RCS) and provide quotes to the borrower to justify the work done.
Finally, the borrower will be able to submit his work loan application by justifying documents common to all types of consumer loans:
- A proof of identity
- Proof of address
- Last 3 statements of account
- The last tax notice
- The proof of the work to be done and therefore the proof of their relevance
- A certificate of the value of the real estate
- Amortization schedule of the loan (regarding repayment)
- Proof of income and credits in progress
After filing for loan work, the borrower will receive a prior offer of credit work by the financial institution with which he has subscribed. This preliminary offer will include: the type of work undertaken, the amount desired by the borrower, the interest rates that will be applied and the terms of repayment. This is not a loan offer works directly since the borrower has 2 weeks to accept the offer made to him, and then will be signed the legally valid loan agreement.
If the borrower decides to turn to a broker, the same documents will be requested because it is necessary to prove his solvency. Only the broker will go himself to negotiate with the banks to get the most interesting offers for the situation of the borrower. The latter is usually paid by a commission paid by the bank, which implies that the borrower will not have to pay these fees.
Classic work loans
Conventional work loans are work loans granted directly by financial institutions to individuals. This is from the loan affected work and personal loan work.
1. The loan works assigned
The work loan can also be part of the assigned loans category, or allocated credits. We will therefore call this loan a loan affected work. That is to say that the sum made available can only be used for carrying out the work that has been determined in advance. To be sure of this, the borrower will have to give the credit agency a clear credential and the precise amount of its expenses before being granted the work loan.
On the other hand, the borrower can either decide to carry out the work himself or to call on a service provider.
If the borrower decides to carry out the work himself, then the loan funds will be given to him so that he buys the necessary materials. In this case, the borrower must keep carefully all receipts and invoices corresponding to his purchases. Whereas if the borrower uses a service provider, the financial institution with whom the loan was concluded will send the funds directly to the contractor who will carry out the work, and not to the borrower. The service provider must also provide invoices to justify the completion of the work and the use of the funds.
This type of loan is said to be affected because it serves only to carry out previously determined work since the borrower does not have direct access to the funds and can not use them as he sees fit (unlike the personal loan).
For example, you want to renovate the kitchen part of your home. However, your financial resources do not allow you to acquire the movable property of your choice directly. In order to get enough money for this property, you can take out an assigned work loan. In this case, you will need to provide a specific invoice to the lending institution with which you wish to take out the loan. Once the funds are released, they can only be used to carry out specific work for your kitchen, and nothing else. You will not be able to use it to do other work or to buy another property.
The amounts of loans granted by lending institutions or banks for work loans range from € 1,500 to € 21,500. The repayment periods are between 12 and 84 months (1 and 4 years). This loan is also called “loan for small work” because if the amount of work exceeds € 21,500, the borrower will be obliged to take out a mortgage.
2. The personal work loan
Unlike the loan-affected work, the personal loan works allows the borrower to use the unblocked funds as he sees fit. Indeed, in this case the borrower is not obliged to allocate this amount to work specifically. This personal loan work allows him to be able to perform several jobs in his home simultaneously, without having to provide a specific invoice to the financial institution with which he has contracted the loan.
For example, you want to both renovate your kitchen, and add furniture to your bathroom. In this case, you can take out a personal loan work. For this reason, you have not provided a precise invoice for the work to be done. Once the loan is granted, the funds will be released to your benefit, and you can choose the equipment you want to acquire.
However, even if the borrower has funds as he pleases, he must still use them to save energy, carpentry, plumbing or electricity, or for the renovation of a room, the purchase of materials or interior decoration.
Like any consumer credit, the lending institution can grant a loan ranging from € 200 to € 75,000. Here again, the borrower can decide to carry out the work himself, or to go through a service provider. This personal loan works is intended for owners of a primary and / or secondary residence, but also to tenants to allow them to make adjustments. This credit is fixed rate and is reimbursed up to a maximum of 5 years, whose monthly payments are constant and defined when you subscribe for your work loan.
Assisted loans are loans established by the State and distributed by the financial institutions with which an agreement has been signed. These are the Aids of the National Habitat Agency (Anah); the loan agreement for energy renovation; housing savings loan; the Social Accession Loan (PAS); the tax credit for sustainable development; a loan granted by the Caf (Pah) or a loan granted by the pension funds.
1. Assistance from the National Housing Agency (Anah)
This aid is provided through subsidies granted to the most modest households. They make it possible to finance eco-renovation projects for individuals. This assistance may be granted in three cases: when the owner is occupant of the dwelling for which the work loan is taken out; when the owner is lessor; or in the case of a syndicate of co-owners for work on the common areas.
This subsidy is not a right for these households, it is granted according to the priorities according to the work to be carried out and their amount; as well as the means of the home in question.
a. When the owner is occupant
The subsidy granted by Anah for a loan works concerns modest homes and very modest. Ceilings have been determined by the Agency, which you can read directly on their website.
For this, the Anah will observe the income of the home in n-2 (that is to say in 2014 for a work loan requested in 2016). However, if the household’s income has been declining over these two years, it is possible to provide a tax notice to the Agency so that the income in n-1 is taken into account (so in 2015 for a loan works requested in 2016).
In order to obtain this grant to finance his work loan, the homeowner must submit to several commitments:
- That the work concerns his principal residence
- That housing is at least 15 years old
- Live for 6 years in renovated housing
This grant covers several types of work and the amounts are variable. The minimum amount of the works must be 1,500 € HT, except for very modest households, which have no minimum threshold. On the other hand, depending on the work to be done with this loan work, the maximum amounts vary:
- For heavy work of housing rehabilitation: up to a maximum of 50 000 €
- For housing accessibility works (for handicaps for example): up to a maximum of 20 000 €
- For sanitation works: up to a maximum of 20 000 €
- For security work: up to 20 000 €
- For energy performance work: up to € 20,000
The subsidy rates for work loans granted by Anah vary according to the work to be carried out:
|Households to resources
|Households with income
|Projects of heavy work of rehabilitation of an unworthy or very degraded housing||50%||50%|
|Work for the safety and security of the habitat||50%||50%|
|Works for the autonomy of the person (eg development for the handicapped)||50%||35%|
|Work against energy poverty||50%||35%|
The procedure for obtaining this grant is quite simple. You must first make a request by completing a form. Once it is filled, the borrower can submit his application to the local delegation of Anah in the department where the housing is located. Subsequently, the file will be examined and the beginning of the work can begin only after the granting of the grant by Anah. Finally, the work must be completed within three years of the decision of the Agency granting the grant.
b. When the owner is the lessor
In this situation, no resource condition is required for the household. On the other hand, the granting of the work loan, and therefore of the subsidy, is subordinated to the signing of a rent-controlled agreement with Anah.
This agreement sets the commitments that the owner must respect, and this for 9 years:
- That rented housing is decent
- The maximum rent will be fixed by the Agency
- That rented housing be as principal residence to households whose incomes are below certain ceilings
When the landlord is a lessor, the housing must also be at least 15 years old, and the work must be at least 1,500 €. The feasible works are the same, but the ceilings of the work loan granted here are higher:
- For heavy rehabilitation work: up to 80 000 €
- For housing accessibility works: up to 60 000 €
- For sanitation work: up to 60 000 €
- For security work: up to 60 000 €
- For energy performance work: up to € 60,000
For this type of work loan, subsidy rates range from 25% to 35% depending on the work to be done. For heavy rehabilitation work, it is 35%; for improvement work, it is 25%. The grant application procedure is the same here as for a homeowner.
2. The contracted loan works
This type of loan works to acquire a principal residence or to build one’s home. But he is also subscribed for the purpose of carrying out work on his principal residence. Several works may be involved in this loan agreement works, including:
- Expansion or improvement of housing conditions
- Housing adaptation (for people with disabilities for example)
- Improving the energy performance of housing
This loan works is not subject to conditions of resources. The requirements relate more specifically to housing. In the first place, the dwelling must be the principal residence of the owner, that is to say, he must live in the dwelling for at least 8 months in the year, and that he be of French nationality or have a residence permit. Finally, the borrower undertakes to live in the dwelling during the year following the end of the work.
This loan works is granted when the works are of an amount greater than or equal to 4 000 € TTC. The repayment of this loan agreement works can be between 5 and 35 years. Its interest rates are set and regulated by the state and depend on the duration of the borrowing. For a work loan of less than 12 years, the maximum fixed rate is 4.45%. For a work loan of more than 20 years, the maximum fixed rate is 4.90%.
The procedure to subscribe to a contracted work loan is not very complex since it is sufficient to go to a bank approved to grant this type of loan (generally all banks have this authorization), and submit a request for ready with all the documents usually requested (payrolls, notify if you have another credit in progress, etc.).
This type of loan works has 2 major advantages. In the first place, it is possible to combine it with other advantages offered by other work loans or state aids. This is particularly the case with the APL (Personalized Housing Assistance), with a loan to work rate 0 (PTZ), or with a PEL (Loan Savings Housing). The second advantage of this loan works is that it allows to have reduced notarial fees compared to other possibilities of underwriting work loans.
3. Housing Savings Loan (PEL)
The housing savings loan is closely linked to the Housing Savings Plan (PEL) and / or the Housing Savings Account (CEL), which are bank accounts opened by individuals to save.
This housing savings loan allows to acquire or build a principal residence, but can also be seen as a work loan because it allows to carry out renovations and improvements to the principal residence of the borrower, and only that since 1 March 2016. That is to say that for ELPs opened before this date, the loan work subscribed can also be used to carry out work in a second home, while after that date, it can only be used for work in a principal residence.
To be able to take out a housing savings loan as a work loan, conditions must be met:
- The borrower must have saved for at least 4 years
- Whether the work corresponds to the expansion or improvement of the borrower’s principal residence
This home savings loan can not exceed an amount of € 92,000 for a duration of the work loan between 2 and 15 years. In the case of a CEL loan, the amount can not exceed € 23,000. These two types of loan can be cumulated, but still within the limit of 92 000 € of the home savings loan. In most cases, the housing savings loan application must be made to the bank where the ELP was opened. However, it is possible to go to another lending institution if the borrower wishes, but this will require certain conditions. The granting of this work loan entails the closure of the ELP.
The amount of the loan granted depends on the interest earned during the savings years, as well as the duration of the chosen loan (between 2 and 15 years). These are called loan fees. They therefore correspond to the totality of the interests acquired, collected. The loan interest rate works in this situation depends on the period during which the ELP was opened. Here is the summary table of these interest rates:
|Open plan||Interest rate of the loan PEL|
|Between the 16/05/1986 and the 07/02/1994||6.32%|
|Between the 08/02/1994 and the 22/01/1997||5.54%|
|Between the 23/01/1997 and the 09/06/1998||4.80%|
|Between the 10/06/1998 and the 25/07/1999||4.60%|
|Between 26/07/1999 and 30/06/2000||4.31%|
|Between the 01/07/2000 and the 31/07/2003||4.97%|
|Between the 01/08/2003 and the 31/01/2015||4.20%|
|Between the 01/02/2015 and the 31/01/2016||3.20%|
|Between the 01/02/2016 and the 31/07/2016||2.70%|
|Since August 1, 2016||2.20%|
4. The Social Accession Loan (PAS)
The Social Accession Loan, like any assisted loan, firstly allows people in financial difficulty to acquire their principal residence. It may concern the purchase or construction of a new or old dwelling. It can also be subscribed as a work loan when it concerns housing improvement or energy saving works.
In addition, by its nature of assisted loan, this type of loan work can be subscribed with financial institutions that have entered into an agreement with the State allowing them to grant such loans.
The minimum amount of this loan works is 4 000 €. Its repayment is planned between 5 and 25 years, but the contract with the financial institution can provide a repayment over 35 years.
Because this is a loan assisted, this type of loan works will be given to a certain type of home. That is, household resources will be taken into account and ceilings have been regulated. These maximum resources taken into account are defined according to the number of occupants of the future home and the zone of implantation of the principal residence:
|Number of people destined to occupy the dwelling||Zone A||Zone B1||Zone B2||Zone C|
|1 person||37000 €||30000 €||27000 €||24000 €|
|2 persons||51800 €||42000 €||37800 €||33600 €|
|3 people||62900 €||51000 €||45900 €||40800 €|
|4 people||74000 €||60000 €||54000 €||48000 €|
|5 people||85100 €||69000 €||62100 €||55200 €|
|6 persons||96200 €||78000 €||70200 €||62400 €|
|7 people||107300 €||87000 €||78300 €||69600 €|
|From 8 people||118400 €||96000 €||86400 €||76800 €|
The maximum repayment rate of the social loan depends on the duration of the loan determined in the loan agreement and the type of rate defined by the financial institution (depending on whether it is variable or fixed):
|term of the loan||Fixed rate||Floating rate|
|Less than or equal to 12 years||2.85%||2.85%|
|Between 12 and 15 years||3.05%||2.85%|
|Between 15 and 20 years||3.20%||2.85%|
|Greater than 20 years||3.30%||2.85%|
Although this type of loan can sometimes cover the entire amount of the work, it is nevertheless possible to combine it with other types of assisted loans if the amount of the loan does not pay for all the work.
5. The sustainable development tax credit / Energy transition tax credit (Cite)
This credit works allows the borrower to deduct from his income on taxes, part of his work expenses related to the energy performance of his home. For this, the borrower must own a principal residence, whether it is a house or an apartment.
The deductible amount for this work loan is capped at € 8,000 for a single person, and € 16,000 for a couple over a period of 5 consecutive years. For each expenditure corresponds a deductible percentage of the taxes of the borrower which goes from 13 to 45%. The borrower, if he takes out this type of work loan, will have to justify the acquisition of thermal insulation materials, heat pumps, energy production equipment using renewable energy, etc.
Indeed, as the name suggests, this loan work can be granted only in order to make more energy housing. This loan is part of France’s recent concerns about renewable energies and the preservation of the environment.
A company will have to perform these services and provide detailed invoices to the borrower who will not have to bring them with his tax notice, to benefit from the deduction.
6. Caf loan for home improvement (Pah)
This work loan benefits people with a family benefit to the Family Allowance Fund (CAF). These persons must, as for any work loan, be the owner or tenant of the dwelling in question and that this is their main residence. The borrower must want to carry out repair work, improvement, thermal insulation or remediation work. This loan works excluded the maintenance work (type decoration, painting, etc.).
The amount of the home improvement work loan can cover up to 80% of the cost of the work. This loan is also subject to a ceiling of € 1,067.14. The advantage of this loan works is that it is at 1%, repayable over a maximum period of 3 years.
Upon presentation of the quote, and when signing the loan contract works, half of the amount is paid to the borrower and the other party at the end of the work, upon presentation of the invoice.
7. Loan of pension funds for carrying out housing work
This type of loan works concerns all retired persons, regardless of their pension plan, who own or rent. This loan works is granted to borrowers who wish to carry out improvement work in their main residence. It is essentially granted when it is necessary to improve housing to prevent the loss of independence of the elderly: expansion of doors or installation of grab bars, insulation, connection to sewers, plumbing and sanitary, etc.
The conditions vary from one pension fund to another, the rates of this type of loan works can range from 3 to 7%. The amount that can be borrowed ranges from € 2,500 to € 15,000 and the loan term from 2 to 10 years.
Regarding interest rates
In France, when one takes out a loan, and thus a loan work, it is subject to interest rates sometimes determined by the financial organizations themselves, but more generally they are regulated by French legislation.
There are also several interest rates, and it is not always easy to navigate. And when you want to contract a work loan, it is strongly advised to make simulations of loan on the internet, in order to know approximately the cost of this loan, and thus allow the borrower to become aware of his commitment to the loan. financial institution with which he has contracted. There are four types of interest rates: the nominal rate, the real rate, the global effective rate (TEG) and the rate of wear.
The nominal interest rate serves as a reference for calculating the remuneration of money lent by the lending institution or the bank. That is to say that it is from this rate that the interest on monthly payments that the borrower will have to pay will be calculated. This rate can be fixed or variable.
For example, if you take out a one-year work loan for € 10,000 and a nominal rate of 5%, the borrower will have to pay € 500 of interest to the financial institution.
However, the nominal interest rate is not the rate used to determine the total and actual cost of a credit. Indeed, for this, it is necessary to refer to the global effective rate (TEG).
The TEG is the only interest rate recognized as reliable by law to determine fully and therefore globally the amount of a credit. It is with this TEG that borrowers must compare the various credit offers offered to them before taking out any loan. This TEG makes it possible to visualize all the subscribed credit since it takes into account, according to the article L313-1 of the Code of the consumption:
- Interest payable (on the basis of the nominal rate)
- Ancillary and compulsory costs (such as the application fees)
For example, if you take out a work loan of up to € 10,000 over 1 year, and the nominal rate is 5%, the TEG will also be 5%. But if you find yourself paying in addition to the € 100 processing fee, then the TEG will go up to a rate of 6%.
Finally, the TEG also has a cap not to exceed, called the rate of wear. This rate of wear is the maximum ceiling of the TEG to which any loan, and therefore a work loan, can be granted.
Is insurance required to take out a work loan?
A “borrower insurance” is usually offered by financial institutions. In theory, it is optional but nevertheless strongly recommended to mitigate the incidents of the life. This usually covers the death of the borrower, absolute and permanent disability and temporary incapacity for work (ITT). In option can be proposed the loss of employment. This allows financial institutions to obtain repayment of the work loan even in the event of insolvency of the borrower (that is to say of an impossibility to pay the loan contracted). This insurance will take over the repayment of the loan, until its end, or until the borrower can again honor his commitment.
This insurance is optional, but even though banks can not oblige borrowers to take out insurance, they can refuse to grant the loan if the borrower does not buy one. This amounts to considering this “borrower insurance” as mandatory.
To subscribe to this insurance, the borrower must complete an initial risk questionnaire. Indeed, it is mainly a health questionnaire that allows the insurer to rate the best, in light of the possible history of the borrower, his risk and therefore the insurance premium that he will be led to pay. This document is important because it allows the insurance company to cancel the contract, especially in case of misrepresentation made by the borrower (article L113-8 of the Insurance Code).
As for most contracts, including loan agreements such as the work loan, the borrower has 14 days of withdrawal following the signing of the contract (Article L311-12 of the Consumer Code). Moreover, under French law, the Consumer Code protects the consumer, thus the borrower, by imposing on the insurance company a pre-contractual obligation of information (Article L311-6 of the Consumer Code). That is, the insurer has the obligation to provide all the information concerning insurance offers so that the borrower becomes aware of the extent of his commitment, and chooses in an informed manner and in view of his needs one of the loans work.
Is it possible to take out a loan at work rate 0?
It is indeed possible to contract a Work loan rate 0 (PTZ), but this can only be done under certain specific conditions. Even if no resource requirement is required from the borrower, the works themselves must meet energy performance criteria. That is, the energy consumption and the impact in terms of greenhouse gas emissions from housing will be evaluated. In this case, we also speak of an “Eco-loan rate 0”.