Revolving debt is a credit not assigned to a specific expense, as well as personal credit.
Obligations of the lender
Duty to inform
Some elements are required to be disclosed by the lender:
– The maximum amount of credit;
– The annual percentage rate of credit (may be different depending on the month);
– Limitation of the credit period to 1 year renewable;
– 3 months before the expiry of the contract, the lender must notify the conditions for renewal;
– Obligation or not to subscribe for an insurance (often compulsory).
The lender must send monthly updated situation revolving credit:
– The share of capital stock;
– The amount due;
– Rate period;
– The estimated duration of repayment;
– The refunded amount (principal and interest).
Finally, once per year, the lender must inform the client of the total outstanding amount.
Obligation of credit check
In order to fight against over-indebtedness, the reform of consumer credit provides for an obligation for the lender to verify the borrower’s creditworthiness:
• Checking the file identifying incidents of loan repayment;
• Complete the lender an information sheet that will be attached to proof of income and a home loan more than 3,000 $;
• In case of application for renewal of a revolving credit facility that lasts for more than 3 years.
Prohibition of Incitement to subscribe
Other measures prohibit incitement to purchase a revolving credit, mostly responsible over-indebtedness. As follows:
– Sellers of credit are required to offer a standard credit or revolving credit for any loan of more than 1,000 $, the consumer must be clearly aware of this choice.
– Sellers of credits cannot be encouraged to sell through a revolving credit premium.
– The wear rate of the revolving credit facility is set to become equal to that of a traditional loan.
– Gifts given to opening a credit can no longer be advertised and will no longer exceed the ceiling of 80 $.
Rights and obligations of the borrower
Revolving debt is more flexible than other loans during the contract. But be careful if you cannot repay it!
The borrower can:
– Reduce its credit reserve;
– Suspend the right to use it;
– Terminate the contract but must repay the amount of the reserve used;
– Transform its revolving credit in traditional credit upon renewal of the contract;
– Make a prepayment, partial or full without penalty.
In the event of late payment, the borrower must:
– Make the repayment of the amount due plus interest;
– Pay compensation for delay (usually 8%) of the amount due;
– Delay is usually accompanied by a termination.
Repayment term revolving credit
the maximum repayment term of revolving credit is downgraded:
– 3 years maximum for a loan of less than 3,000 $;
– 5 years maximum for a loan of more than 3,000 $
Consequence: monthly increase, but the overall cost of credit to the consumer decreases.
However, each new use of your revolving credit postpones the repayment period.