HELPLINE: 
French expats with an Assurance Vie policy can easily benefit from France’s Lombard loan opportunity by leveraging the private banking system, says wealth expert Daniel Butcher of DTB Wealth Management.
Lombard loans (crédit lombard), a loan that is taken out against liquid assets, are an effective way to
finance projects. These types of loans first originated in Italy’s Lombardy region in the Middle Ages reflecting the type of borrowing merchants were engaged with. Today in France, Lombard loans can be secured using an Assurance Vie and policy owners can borrow up to 100% of the amount invested.
By using a private bank, wealth expert Daniel Butcher says that these loans are interest only – with a fixed rate of 1.5% interest (depending on when you start the loan) – and renewable every three years. Applicants need not worry about adding loan insurance (assurance décès invalidité), which is usually
standard practice when borrowing funds within the French banking system, as is not necessary for this type of loan.
“In France, one private bank offers a Lombard loan solution that can be accessed with a €100,000 investment,” said Daniel. “This provides my clients with great opportunities, because, for example, in Luxembourg a Lombard loan starts at €1 million. The French version offers a much more accessible-to-all solution.”
There are areas of the borrowing process that must be dealt with carefully, which is why it is important to seek advice from a finance specialist before proceeding. “The loan has to be justified as it is forbidden to borrow to invest in France,” explained Daniel. “But it can be utilised for many reasons, such as a house renovation. The conditions for accessing the loan are generally straightforward, however, and once you have an Assurance Vie you can borrow at any time.”
One hurdle that applicants must overcome is that the riskier the assets invested in the Assurance Vie, the less you can borrow. “However, in essence, there is space for flexibility,” said Daniel. “Each category of assets allows for a certain percentage to be borrowed. For example, if you are invested in the ‘fonds en euros’, which is popular with investors, you can borrow 100% of what is invested.”
Daniel urges potential investors with medium term or future projects to consider this option because it is a straightforward process and the Assurance Vie product will grow during the loan period.
“Setting this up is as easy as setting up any Assurance Vie,” said Daniel. “There is absolutely no obligation to use this facility once in the Assurance Vie, it is just there when one needs it.”