The Arrago company offers a money loan offer for senior homeowners. This loan is based on the value of the property and allows you to take out a loan without repaying monthly payments.
Who said projects stop after 60 years? By offering a loan offer aimed at seniors and without monthly payments, the company wanted to target a category of people who have little access to credit.
“The transition to retirement is a time when income drops. But banks offer loans based on income, retirees never check the boxes,” explains the company's general manager Alexis Rouëssé to BFM Business.
Most retirees can still count on their assets: between 60 and 69 years old, 66% are owners, and after 70 years old, this figure rises to 71%, according to INSEE. “But it’s not by bringing a cut stone to your baker that you pay for your baguette,” points out Alexis Rouëssé. In other words, retirees lack liquidity.
The company therefore offers them a loan which allows them to borrow between 20 and 60% of the value of their property. And this, without paying monthly payments. With the amount obtained, these seniors generally plan to carry out work, finance a big trip or even give a sum of money to their children.
“It can help their children build up a contribution to buy real estate in their turn, because today we inherit later and later,” emphasizes Alexis Rouëssé.
Higher interest than for a home loan
But then when is the loan repaid? “Any time!”, replies the co-founder of Arrago. Borrowers can decide to repay part of the loan gradually, or to repay all at once when the property is sold when they move into a retirement home. In the event of death, it is up to the heirs to choose whether to repay the loan by selling the property or with other funds. It is therefore a form of mortgage, but without monthly payment.
However, this loan does not only have advantages. The interest rate is quite high: it is close to a rate for consumer credit and is around 6%. And since it does not provide for monthly payments, interest accumulates over the years and is calculated on the total amount (unless you repay part along the way).
The company thus gives the example of Monique, 67 years old, who owns an apartment worth 600,000 euros in a nearby Paris suburb. She can borrow 140,000 euros. Upon his death at age 90, the amount borrowed and interest will be deducted from the value of the property. Arrago, who is banking on a rise in real estate prices, estimates that his heirs will then have 300,000 euros left.
The company has already sold more than 300 loans, for a total of 42 million euros.
