How to calculate your consumer credit?

A consumer credit is above all a simple and effective way to finance a personal project. Whether it is to do work and renovate your home, go on a trip around the world or simply buy a new car, anything is possible. In order to make the right choice, take the time to calculate and compare your consumer credit before you embark on the adventure.

Define your project and its need for financing

Define your project and its need for financing

Properly defining your project will allow you to accurately determine the exact amount you need to fund it. But this is not the only possibility, indeed you can also take advantage of your consumer credit simulation to buy back some of your credits.

A. Work in your home

If you own an apartment or a house, it can be interesting to renovate some rooms to improve the comfort of your home. Whether it’s a living room like your living room or the rooms in your home, getting a consumer credit will allow you to simply carry out your work without waiting. No need for a very large sum, indeed you can very well help you by other individuals to save money. Online platforms are available on the internet to connect experienced hobbyists to help others.

B. Buying a new or used car

Even if public transport remains an economic and ecological alternative, sometimes it remains necessary to have one’s own vehicle, especially to get to work every day. In this case buying a used car is a very good option since a second-hand car in good condition is an economical solution. By making an online loan application you can quickly find out if you can get the financing needed for its purchase. Thus less inconvenience to go to work every morning or just do the shopping of the week, or even go on a weekend with family.

C. A personal loan for a project

Many life projects often require a lot of money to make them happen. This is for example the case for a wedding or a trip to the end of the world. A personal loan is therefore an effective solution to obtain the necessary funds to organize the event. In addition, a personal loan can also be useful for other purchases, such as equipping a house with new appliances, buying new furniture or buying new computer equipment.

D. Purchase of credit

A credit redemption is a great way to reduce the repayment of one or more overly expensive loans. The interest is twofold since you can reduce your monthly repayments and also see more clearly in your monthly budget while freeing up your purchasing power. A repurchase of credit can also allow you to lower the cost of your credit, especially if it is a revolving credit (also called with money reserve, or revolving), indeed the rates of these credits are often very high. In addition a credit redemption can allow you to finance a new personal project. So you can take the opportunity to consolidate without waiting for your monthly repayment for simplicity.

Calculating credit for consumption

Calculating credit for consumption

A consumer credit is an effective solution to obtain the financing needed to carry out a personal project. We explain to you how the amount of this loan is calculated: according to your project, its amount, according to the repayment period and according to the proposed rate.

A. Define the amount to borrow according to his project

The amount you want to borrow is a central part of your application. In order for your request to be the most adapted to your needs, take the time to determine the amount needed to complete your project. For example for work in your apartment, take the time to make quotes from local artisans. If you prefer to do the work yourself with friends, you can buy the necessary materials yourself. And if you need help, online platforms are available for you to connect with other homebuyers. So you can make significant savings while making the collaborative economy work. And why not continue in this approach by applying for a loan between individuals to maintain the collaborative mindset.

B. Choosing the right repayment period

The repayment term is important because it directly affects the amount paid back each month as well as the total cost of credit. Indeed with a longer repayment period the monthly payments will be lower, but in the end you will pay more for your credit. If you choose a shorter duration, the credit will theoretically be cheaper, because the interest due on the amount of your credit each month is calculated based on the capital remaining to be repaid. So with a shorter term you will pay less interest than for a longer period for repayment of the loan (with an identical APR).

Also think that a too large monthly payment can be a problem for your purchasing power, and prevent you from completing your monthly budget. In this case, take the time to establish a monthly budget of your income and expenses, and anticipate the monthly payment of this refund. It is also a good way to not be surprised by the first installments of this credit. In addition it is possible to request an early repayment to pay your loan from the credit agency.

C. Compare the offers according to the total amount of the credit (APR, application fees)

To compare the offers according to your financing needs, the easiest way is to compare the total amount of credit. When you apply for consumer credit, it is offered directly by the organization. This total cost of the loan includes the interest due on each monthly payment as well as the amount of the insurance. In addition to this may be possible application fees, but these are already included in the proposed APR on the credit offer.

You can consult our credit guide to help you in your application for consumer credit and to compare them well. We also advise you to take good care of making a request that corresponds to your need for financing. With the same amount and duration of repayment, you can clearly identify who offers the most advantageous solution. The total cost of credit and the APR are reliable indicators for determining which credit is the cheapest. But also take into account other parameters, such as the opinions of former customers or the possibility of requesting an early refund. Each request is unique, so you will have to personally compare the offers made to you according to your personal project.

D. Example of calculations of a consumer credit

To help you calculate your consumer credit and compare the different offers, we offer below a table summarizing the method of calculating a consumer credit.

As you can see, the longer the repayment period, the more expensive it will be. Even if the rate is lower, the repayment term should be taken into account with great attention. Indeed even a small interest rate may ultimately make your credit operation costly, the total cost of credit is the most reliable value. However, remain open to other proposals that would be more beneficial to you in terms of flexibility or customer contact from the credit institution.

Note: some projects such as carrying out work in your home allow you to obtain a lower rate than for other projects such as the purchase of a used car. So be careful to apply according to your project during a simulation of consumer credit.

To conclude…

Calculating your consumer credit is simple, but it is essential to understand how it works to make the right choice of credit. The annual percentage rate of charge (APR) and the repayment period are the two elements that come into play when calculating the total cost of your credit. With a shorter repayment term, and even with a higher rate, you can save money. Think about it when you make your credit requests online in order to compare the different offers that are offered to you.

You can take a look at our special guide on the different ways to compare credit online, for more information on how to compare different types of consumer credit. You can also consult our special file on credit redemption if you need to obtain a buy back of consumer credit.