The loan in fine is often presented as fiscally advantageous. However, we must not forget that it is still expensive.
As opposed to the repayable loan, the loan in fine makes it possible to repay during its term only interest. The capital is repaid in one go, at maturity. This type of financing is favorable to investors who want to buy a property for rent or exceptionally for the acquisition of principal residence Explanations.
Definition of the loan in fine
The loan in fine is a mortgage that gives the opportunity to repay only interest throughout the term of the loan. The capital is, in turn, repay in full at the maturity of the credit.
This type of loan can be subscribed as well by an individual as by a professional. The amount of capital granted is not limited but its minimum value is 21,500 euros. The loan in fine is generally granted for an average duration of between 3 and 25 years.
The operating mode of the loan in fine
The mechanism of the loan in fine is relatively simple. Each month, the borrower only pays interest whose amount remains stable. Interest is, however, higher in the case of the loan in fine than with a depreciable loan. The capital is not refunded until the end of the loan.
Example: a borrower wants to obtain a credit of 100,000 euros over 10 years, at 1.5%. He will pay 897.91 euros each month with a depreciable loan. In total, the cost of his credit will be about 7.750 euros. With a loan in the fine at the same rate, interest will be 1,500 euros per year or 15,000 euros over 10 years.
Advantages and disadvantages of the loan in fine
The loan in fine first provides a tax benefit. Indeed, the borrower can deduct the loan interest from his rental income. It benefits from a lower monthly payment thanks to the deferred repayment of capital and a larger volume of interest to be deducted. The other benefit of credit in fine is cash flow. This type of loan has the effect of limiting disbursements at maturity. It is therefore ideal for investors who wish to limit their cash outflows during the loan and is able to repay the principal in one go at maturity.
The main disadvantage of the loan in fine is its high rate, higher than those of depreciable loans. In fact, in the context of a repayable loan, the repayment of the capital is spread out over time and the interest is calculated on the basis of the capital remaining due, which implies that they are degressive as and when repayment. Credit interest in fine is not degressive since it varies according to the duration of the loan. They will therefore always be the same amount making it easier to calculate the total cost of credit.