Published on: November 26, 2024 | By: @rprasanth_kumar
When it comes to loans in France, three terms often come up: Taux annuel effectif global (TAEG), Taux de l’usure, and Taux d’intérêt nominal. Each term has a specific meaning and serves a unique purpose. Knowing how they differ can help you make informed decisions about loans, understand costs, and avoid unnecessary fees.
Taux Annuel Effectif Global (TAEG)
The Annual Percentage Rate (APR), or Taux Annuel Effectif Global (TAEG) in French, represents the total cost of borrowing over a year. The TAEG includes the nominal interest rate as well as additional costs, making it a comprehensive percentage that gives a complete of the loan’s cost. This helps in comparing the loans offered by multiple providers and choosing the best option.
The TAEG typically includes:
- The nominal interest rate (taux d’intérêt nominal) or the base rate,
- Loan application and processing fees (frais de dossier),
- Insurance fees (frais d’assurance), if insurance is required,
- Broker or intermediary fees (honoraires d’intermédiaire),
- Any other required fees (garantie, frais divers).
Example: Suppose you’re offered a mortgage with a nominal interest rate (taux d’intérêt nominal) of 4%, plus a 1% processing fee and insurance. The TAEG might then be 4.5%, reflecting the total cost. This means that although your loan repayments might be based on a 4% interest rate, the TAEG gives a clearer picture of the actual yearly cost.
Taux de l’usure
The taux de l’usure is a legal upper limit on the interest rate or TAEG that lenders can charge in France. Set by Banque de France, this maximum interest rate is updated quarterly. It varies depending on the loan type (mortgage, personal loan, consumer credit, etc.) and its duration.
The purpose of the taux de l’usure is to protect consumers from excessively high rates that could be financially damaging. This limit prevents lenders from charging interest rates that would be considered abusive.
Example: Let’s say the taux de l’usure for a personal loan is set at 10%. This means that a lender cannot legally offer a personal loan with a TAEG over 10%. Any offer above this rate would be deemed extortionate and could be invalidated by law, protecting borrowers from excessive rates.
| Category | Applicable Taux de l’usure as of October 1, 2024 |
| Loans less than or equal to 75,000 euros | |
| Loans of an amount less than or equal to 3,000 euros | 22.71% |
| Loans of an amount greater than 3,000 euros and less than or equal to 6,000 euros | 14.59% |
| Loans of an amount greater than 6,000 euros | 8.29% |
| Housing Loans (Crédit immobilier) Mortgages and loans greater than 75,000 euros | |
| Fixed-rate loans with a term of less than 10 years | 4.63% |
| Fixed-rate loans with a term between 10 years and less than 20 years | 6.03% |
| Fixed-rate loans with a term of 20 years and more | 5.85% |
| Variable-rate loans | 5.99% |
| Bridging loans | 6.68% |
| Loans to legal entities with no industrial, commercial, craft, agricultural, or non-commercial professional activity | |
| Fixed-rate loans with a term between 2 years and less than 10 years | 6.36% |
| Fixed-rate loans with a term between 10 years and less than 20 years | 6.41% |
| Fixed-rate loans with a term of 20 years and more | 6.43% |
| Variable-rate loans with an initial term greater than 2 years | 7.68% |
| Overdrafts (Découverts en compte) | 18.89% |
| Other loans with an initial term of 2 years or less | 6.99% |
| Loans to individuals acting for professional needs and legal entities with an industrial, commercial, craft, agricultural, or non-commercial professional activity | |
| Overdrafts (Découverts en compte) | 18.89% |
Note: The latest maximum interest rates in France are published on the Banque de France website under publications statistiques.
Taux d’intérêt nominal
The nominal interest rate or taux d’intérêt nominal in French, is simply the base interest rate charged by the lender for borrowing money in France. Unlike the TAEG, it doesn’t include any additional fees or costs. So, it is simply the cost of borrowing itself.
The nominal interest rate helps determine the monthly interest payments, but it doesn’t reflect the total annual cost of a loan, as it excludes administrative fees, insurance, and other charges.
Example: Consider a car loan with a nominal interest rate of 5%. Without any additional fees, this means the basic cost for borrowing would be 5%. However, if there are extra charges (application fees or insurance, for example), the TAEG will be higher than 5%, providing a complete picture of the cost of borrowing.
Summary
- Use the TAEG to understand the total annual cost of a loan, including fees in France.
- Verify the taux de l’usure to ensure the loan complies with legal interest rate limits.
- Know the taux d’intérêt nominal for the base cost but remember it doesn’t include extra fees.
Sources & References 📕
DISCLAIMER
Any finance-related information shared is not professional legal, tax, or investment advice. The information provided is of an educational and general nature and is not investment advice within the meaning of Articles L. 321-1 and D. 321-1 of the French Monetary and Financial Code. Investment carries risks of loss and past performance does not guarantee future performance. Please consult a financial advisor for any professional advice.