Are you about to buy a property that you really like? You do not have the necessary funds, but you intend to take out a loan from your bank. But you wonder if you can take out credit without borrower’s insurance. Is it allowed in France and what are the alternatives to loan insurance? We explain everything to you and as a bonus we give you the name of a specialist actor to help you save money.
The possible use of a loan without borrower’s insurance
What does the law say about taking out creditor insurance? Does it force a person who wants to take out a mortgage with their bank to be covered by insurance? The answer is negative. Nevertheless, any insurance company or broker will advise you to think twice before approaching your bank without collateral. It is rare to see files received when no insurance has been taken out… This is because the banks want to be sure that their customers will repay the loaned amount. The credit insurance thus comes into effect when the insured has a serious health problem (accident, illness, etc.) or dies and can no longer honor his loan. A person also has the freedom to choose the cover that suits him, which is not necessarily the one offered by the bank. To find your way around all offers from insurance organizations, you can use a loan insurance comparison. Depending on your profile and your needs, this tool will select several suitable formulas for you.
Reasons not to take out a home loan with insurance
Here’s a classic situation: Annick is in a relationship, she’s in her seventies and wants to buy real estate soon. Despite a good file, she would like to take out a loan without insurance because she wants to save herself paying contributions. What can she really do?
You yourself may have been rejected by your bank, which did not want to take responsibility for your case (for example, you work in a profession that is considered “exposed”). Regardless of the individual’s personal situation, it is important to find out all the alternatives. Insurance brokers support their clients to help them find a compromise that both preserves their portfolio and makes them credible with a lending organization. Be aware that most French people do not realize that they are not required to take out insurance with their regular bank.
Therefore, you can already hope to save money by signing a contract with an insurance organization outside your bank.
Alternatives to loan insurance
To meet the banks’ requirements, it is better to present them with certain financial guarantees. If you’re not eager to get loan insurance, but you badly need to get that credit, consider alternatives to cover yourself. Among them are:
- the mortgage: it is a question of giving a mortgage to the creditor (the bank) of a property, whether it is a main residence or an outhouse. If the loan is not repaid within the deadline, the property will be seized;
- the guarantee: you ask a third person, physical or legal, to undertake to repay the loan for you in the event of an obstacle. Most of the time, the borrower nominates a relative. He can also turn to a mutual guarantee organization;
- the pledge: this guarantee relates to an intangible asset. You pledge part of your financial capital, such as a savings account. Again, in case of non-repayment, the bank can use this capital.
The role of the Lemoine Act in modifying loan insurance
French law is on the side of the citizen and proves it once again thanks to the provisions of the recent Lemoine law. Imagine that you were not aware of the information in this article: it is possible for you to take out an insurance contract with an organization other than your bank. You thought you couldn’t go back. But thanks to the Lemoine Law, it is now allowed to change insurance, and this the day after signing the mortgage. Again, insurance brokers like Reassure me are aware of all these provisions and can advise you best. They know that the banking monopoly still exists and are helping to make the right choice. The Lemoine Act prevents consumers from being locked into a financial situation that doesn’t suit them. However, the most important condition to be observed is to choose the same type of guarantees again. This legal provision is of particular interest to people who have health problems and who often suffer from the limitations imposed by the medical questionnaire.
As you have probably gathered, although it is possible, it is not advisable to take out a mortgage loan without insurance. In order to relieve everyone’s financial situation, there are many compromises, which are mainly aimed at making it easier to take out or change insurance.