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Credit rate our law firm in Nice has acquired great expertise in this area, having handled many cases involving TEG. A recent case concerned a TEG posted at 6.1%, encouraging the substitution of the legal rate .
The Importance of APR in Loan Agreements:-
The Total Effective Rate (TEG) plays a crucial role in loan agreements because it reflects the total cost of credit borne by the borrower. Interestingly, if the bank makes an error of at least 0.1% on this rate, the legal rate in force on the day of the conclusion of the loan can be substituted for it. The resulting savings can be substantial, especially considering the decline in the legal rate over the years. From 4.26% in 2002, it fell to 0.04% in 2014 and currently stands at 1.01%.
Transition from TEG to APR in Real Estate Credit:-
However, it is important to note that as of October 1, 2016, an important change has come into effect. With the implementation of Ordinance No. 2016-351 relating to consumer credit agreements related to residential real estate and Decree No. 2016-607, the focus shifted from the TEG to the APR in real estate credit.
The Global Effective Annual Rate (APR) includes all the costs borne by the borrower and known to the lender (or determinable by the lender) at the time the loan offer is issued. These fees include interest, administration fees, commissions, intermediation fees, compulsory insurance or guarantee fees, account opening fees, account maintenance fees, withdrawal fees, the costs related to the use of the means of payment linked to the account when the opening of the account was a condition precedent to obtaining the loan. However, costs related to notarial deeds or the acquisition of property are not taken into account in the calculation of the APR.
This reform, which transposes European Directive 2014/17/EU on consumer credit agreements relating to residential real estate, aims to better protect mortgage borrowers.
It should be noted that if a bank were to make an error of 0.1% on the APR mentioned in the loan agreement, it would be subject to the application of the legal rate, replacing the conventional rate. For more details, we invite you to read our in-depth study on this subject.
Such a sanction, synonymous with significant savings, should encourage individuals to entrust their mortgage contracts to experts for an in-depth examination .
