Whether you’re seeking start-up capital to launch a business or want to take out a loan for house renovations, there are finance options available in France for both residents and non-residents, although the entry criteria can be strict. Here’s what you need to know about French bank loans.
Types of French Bank Loans
There are several types of bank loans available in France, but the most common are unsecured general loans, known as ‘un crédit de consommation’. These can be short-term one-off loans for a fixed amount or revolving and non-revolving lines of credit.
The most common general loan is a prêt personnel (personal loan), which can typically be taken out over a period of up to five years for any reason. These can, in theory, be for any amount, although some banks may have a minimum amount (typically around €1,500) and loans for lower than this amount would either not be available, or incur much higher rates.
Depending on your personal situation, it’s often possible to borrow up to 100% of the required amount, so there is no deposit or personal contribution required.
A prêt affecté or crédit affecté (assigned credit) is typically taken out for a specific purpose, such as buying a car (a crédit auto) or home renovations (a crédit travaux). These kinds of loans are only issued by the bank or financer at the point of sale and are paid directly to the seller or service provider. If the sale or proposed works do not take place, the loan will automatically be cancelled.
These loans are often guaranteed against the purchase (known as a gage) and the term of the loan will always be less than the lifespan of the purchased item or works.
Rachat de Crédit
A rachat de crédit is a refinancing loan, designed to consolidate a number of different debts under one single loan. The idea behind these loans is to bring down monthly repayment fees and make debt repayment more manageable, however, it is important to consider the associated fees, interest rates, and loan terms.
Business loans and mortgages
If you’re looking to secure financing for a French property purchase or investment, head over to our French Mortgage Zone. Start-ups and existing businesses searching for financing can learn more in our Running a Business Zone.
Where to Apply for a French Bank Loan
For most applicants, the most convenient option will be to ask your current bank for a loan. As an existing client, you will be most likely to have a loan approved, and the most favourable rates are typically offered to those using multiple services from the same bank.
However, there are other options available including credit brokers such as Empruntis and Meilleur taux, both of whom offer online estimations. For large purchases such as cars or furniture, you may also find repayment options available through the retailers or distributors, often offered in conjunction with a financer. Sometimes these are known as a location avec option d’achat (a rental with the option to buy). Rates can be favourable (some might even offer loans at 0%), but be sure you are fully aware of all the associated fees and charges before signing.
Are You Eligible for a French Bank Loan?
If you are resident in France, have a good credit rating, and sufficient, reliable income, there’s a fair chance that your application for a bank loan will be approved. However, the eligibility criteria are generally strict, so be prepared to provide proof of your financial means and ability to repay the loan within the designated term.
If you’re not resident in France or are self-employed, securing a bank loan is likely to be much more difficult, but it’s not impossible, especially if you have a strong history with your bank and can prove your viability. Non-residents should expect to put down a 25% deposit and provide extensive details of their financial status.
Each application will be considered on an individual basis but these are some of the most important eligibility criteria.
Your financial profile
French banks are notoriously risk-averse, so the stronger your financial profile, the better your chances of a loan approval. Expect to be asked for proof of your employment, annual income, and any other debts or liabilities. For self-employed or business owners, expect to be asked for two or three years of income tax returns, showing a steady revenue and a reliable client base.
By law in France, an individual’s financial liabilities (including all mortgages, rental fees, and other loans) must not total more than 33% of your net household income. If the monthly repayments on the loan you are applying for puts your monthly liabilities above this debt-to-income ratio, your loan won’t be approved.
Your history with the bank
French banks will always favour pre-existing clients and the longer your history with the bank (and the better your credit rating), the greater your chances of having a loan approved. This is especially true for cases that might otherwise not be approved, such as non-residents or self-employed workers. If you’ve had bank accounts consistently in credit with your bank over a number of years; have a mortgage loan, insurances, or other products with them (and have never defaulted on repayments); and have a good relationship with your bank advisor, your application is far more likely to be considered.
The purpose of the loan
Personal loans can be taken out for a variety of reasons, including large purchases (such as a car or business equipment), work and renovations (for example, on your property or garden), and to purchase personal items (such as furniture for your property). While in theory, you can take out a loan for anything, banks are far more likely to consider a more serious proposition such as home improvements or the purchase of a car, than say, a 5-star holiday in the Caribbean.
French Bank Loans: Fees and Interest Rates
The rates and fees of French bank loans will vary depending upon the amount you want to borrow, the loan term, and your personal situation. Generally speaking, interest rates on loans in France are quite low (from around 2%) and this can make them an attractive option for expats or second-home owners.
Along with the interest, you might also have to pay administration fees (frais de dossier) and, particularly on larger or long-term loans, you may be required to take out a life insurance policy that covers the loan amount.
Managing Your Finances in France
Managing your finances in a foreign country can feel like a constant challenge, but FrenchEntrée is here to help! Whether you need advice on paying French taxes, taking out insurance, or managing your wealth, our handy Essential Reading guides, expert FAQs, and up-to-date news reports will answer all your questions. And if we don’t have the answers, we can connect you with our trusted financial advisors.