The elements of the revisable loan
The variable rate loans proposed in 2013 have nothing to do with the banking proposals of a few years ago. But if the offers of banks significantly limit the risks incurred by the borrower , they do not provide the same security as a fixed rate proposal.
The operation of the floating rate is based on a financial index on which it is indexed. Depending on the price of this index, the rate will rise or fall. The 2013 banking proposals mainly use Euribor . This index serves as a basis of exchange between the most important banks. The three-month Euribor is currently the most used.
The margin of the bank
The second element that enters into the calculation of the variable rate, the margin of the bank is in some way the profit that the latter will draw from the operation. Today, margins seem lower than a few years ago.
However, there will be competition because the difference may be significant from one organization to another. Do not hesitate to ask the question to your banker because it is rare that the one approaches the subject. You will nevertheless find the information in your loan offer.
To summarize a revolving rate credit, it is:
One of the security features of variable rate loans proposed in 2013 is the cap. A capped loan can not therefore exceed the ceiling set in the loan offer. Thus, the mortgage capped + 1 or + 2 can not exceed more than one point or two points the rate initially set.
The fixed deadline
Another element tending to secure revolving rate loans is the possibility of keeping the monthly payment fixed for the entire duration. Thus, if the Euribor index rises, the duration will be lengthened, allowing the borrower to keep control of his budget .
The controllable rate
In March 2008, a report by MP Frédéric Lefebvre led to a strengthening of the regulations. Now, if your bank offers you a pure revisable loan, it must present you in parallel a loan rate controllable , that is to say either a fixed rate credit or a capped adjustable rate.
It will also have to establish a simulation showing the amount of the payments you will make over the total duration of the loan.
As can be seen, the variable rate loans proposed in 2013 may be good alternatives to fixed loans provided that they are vigilant. Take advantage of fixed-term loans to keep control of your budget.