Are you about to buy a property that you really like? You don’t have the necessary funds, but you want to take out a loan from your bank. But you wonder if you can take out credit without the borrower’s insurance. Is it allowed in France and what are the alternatives to loan insurance? We explain everything to you and give you the name of a specialized actor as a bonus to help you save money.
The possible use of a loan without insurance of the borrower
What does the law say about taking out creditor insurance? Does it oblige a private person, eager to take out a mortgage with his bank, to be covered by insurance? The answer is negative. However, any insurer or broker will advise you to think twice before going to your bank without guarantees. It is rare to see practices accepted when no insurance has been taken out… This is explained by the fact that banks want to be sure that their customers return the loaned sum. Thus, credit insurance comes into effect when the policyholder 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 coverage that suits him and which is not necessarily the one offered by the bank. To find your way around all the offers of the insurance companies, you can use a loan insurance comparison. Depending on your profile and needs, this tool will select different formulas that are right for you.
Reasons not to take out a home loan with insurance
Here’s a classic situation: Annick is in a relationship, is in her seventies, and wants to buy real estate soon. Despite a good record, she wants to eliminate a uninsured credit, because he wants to save himself the payment of contributions. What can it actually do?
You yourself may have been rejected by your bank, which did not want to take charge of your case (for example, you practice a profession considered “at risk”). Regardless of an individual’s personal situation, it is important to know all the alternatives. Insurance brokers support their clients to help them find a compromise that preserves their portfolio and makes them credible with a lending organization. Keep in mind that most French people don’t know that they are not obliged to take out insurance with their bank.
Therefore, you can already hope to save by signing a contract with an insurance organization outside your bank.
Alternatives to loan insurance
To meet the requirements of the banks, it is better to present them with some financial guarantees. If you’re not interested in getting loan insurance, but are desperate to get that credit, consider options for covering yourself. Among these are:
- the mortgage: it is a question of pledging a property to the creditor (the bank), whether it is a main residence or a second home. If the loan is not repaid within the term, the assets are seized;
- the guarantee: ask a third person, natural or legal, to undertake to repay the loan for you in the event of an impediment. Most often, the borrower designates a relative. You can also apply to a mutual guarantee institution;
- the pledge: this guarantee concerns an intangible asset. Commit some of your financial capital, such as a savings account. Again, in the event of non-repayment, the bank can use this capital.
The role of the Lemoine Act in changing loan insurance
French legislation is on the side of the citizen and this is demonstrated once again thanks to the provisions appearing in the recent Lemoine law. Imagine, you were not aware of the information provided in this article: it is possible that you sign an insurance contract with an organization other than your bank. You thought you couldn’t go back. However, thanks to the Lemoine law, he is now allowed to switch insurance, and this, the day after signing the mortgage. Again, insurance brokers like it reassure me I am aware of all these provisions and can best advise you. They know that the banking monopoly still exists and help make the right choice. The Lemoine law prevents the confinement of consumers in a financial situation that does not suit them. However, the main condition to be respected is to choose the same type of guarantees again. This legal provision is particularly interesting for people who have health problems and who often suffer from the constraints imposed by the medical questionnaire.
As you may have understood, although it is possible, it is not advisable to take out a mortgage without insurance. To alleviate everyone’s financial situation, there are many compromises that are aimed in particular at making it easier to take out or switch insurance.
