0 per cent loan - advice please

[Breton Wench]

Hi,

I need some input and extra heads on this one. Living in France, three kids, 150 year old house, annual income about 18,000 euros. No loans, no car financing, no CC's - only the mortgage.
We have some savings, about 4,000 euros but these are constantly delved into to refurbish the house - double glazing, insulate the roof, damp proof the walls, replace old stove, etc. petit a petit
One large job that is required is that we need a new fosse septique - or sewerage system fitted. This will be in the region of 7 to 8,000 euros. Which we could save for, except that it is kinda urgent as all the old houses here are now under a two year deadline to upgrade.

Here is the question - the French government are offering 10 year 0 per cent interest loans for this kind of work. Should we take one? Because it is 0 interest rate, I see it as pulling the money forward from the bank that we would save anyway, and the work would be done ahead of schedule, making the house conform to regs and be a lot more saleable should we ever have to sell ( BTW, with the kids in schools and colleges locally, we are going to be here at least another 12 years).

But, I am kind of iffy about loans - the mortgage is the only bank loan we have ever had, so it's a touchy subject.
DH is in a solid job, self employed with more work than ever before, and the mortgage is not a problem - so am I being wise or foolish to consider taking on this loan?

The floor is yours, friends.......

[marvholly]

I am normally quite leary of 0% loans. However, since this is a government loan I would consider it. I would want to read and maybe have an accountant and/or lawyer check ALL the paperwork before I signed.

Also, this may be part of France's stimulus to try to get the economy moving/improving/reduce unemployment. What has been reported in the news in the last 30-90 days?

[kork13]

Financially, it's a reasonable (if not good) idea to take the loan -- it makes sense, because even a simple savings account can provide a better return on the money that would otherwise have gone toward paying for the sewerage setup. If you're amiable to using the loan, I would say take it.

At the same time, if you're not comfortable with the idea of having the loan, I would personally say don't do it. IMO, it's worth making financial sacrifices on behalf of being comfortable with what you're doing.

[Breton Wench]

Also, this may be part of France's stimulus to try to get the economy moving/improving/reduce unemployment. What has been reported in the news in the last 30-90 days?

Partly true, it's a building incentive, but has been in place for a couple of years now to get the older properties up to scratch

I suppose it's the 10 year bit that's niggling me. It seems like a long time ; mind you we still have 22 years left on the mortgage!!!

Keep those POV's coming

[kork13]

I suppose it's the 10 year bit that's niggling me. It seems like a long time ; mind you we still have 22 years left on the mortgage!!!

Would you have the option to pre-pay the loan? For example, if the payment is 75 euros per month, could make 150/mo payments? That would essentially make it a 5 year loan, if your biggest hesitation is the length of the loan.

[disneysteve]

There are times when financial concerns must take a back seat to more important issues. You aren't asking about taking out a loan to go on vacation or to buy a fancy new car. Your house must get a new sewage system and the work must be done within 2 years. You have minimal savings, only enough to cover half of the anticipated cost, and that would leave you with nothing in savings.

I'd say this government loan is a great deal. It will allow you to get the necessary work done in a timely manner while costing you nothing at all in finance charges. The length of the loan is really of no significance since it is at 0%. Prepaying it won't save you a penny in interest. It make more sense to keep your money invested as long as possible and just pay this loan off at the scheduled rate.

[Ima saver]

I agree with disneysteve. I think you should take the loan and have the work done.

[snshijuptr]

If you can prepay the loan, then do it for sure. You can pay the minimum on the loan and save the rest. If you ever need to get rid of the debt, you can throw your savings at it. In the meantime the debt will actually help you gain stability by giving you 10 years to save the money for a necessary repair.

[Breton Wench]

Thanks people. I have been talking to two other home owners here today and the real issue is that because the work has to be done out by approved professionals, it means that the cowboys don't get a sniff. Taking the loan means we get a proper job and don't have to cut corners - important to both of us for the long term.....if your sewage starts to play up, it's not like a fuse box !!!

I am seeing the bank next week to start the ball rolling. And yes, both the other residents said you can pay over the agreed amount and clear it in advance.
Take a bow people, this is exactly what I needed this forum to do - tease out the knots and give me an overview.