What parameters determine the cost of a loan?

 

The cost of credit consists of expenses related to interest, depending, among others on the amount of the loan and the borrower’s own contribution, as well as about credit expenses, commission, necessary insurance or additional products under cross selling.

Total cost of credit

Total cost of credit

The cost of credit depends to the greatest extent on parameters such as:

Regardless of which loan we take – a large, long-term mortgage, or a short-term cash or car loan, we always have to bear some costs in connection with it. The bank lends customers money to a specific percentage, thanks to which it builds its profits.

  • the interest rate on the liability,
  • loan period,
  • selection of equal or decreasing installments,
  • the amount of approximately credit costs, which include the commission for joining the loan, insurance costs or real estate valuation, if it constitutes collateral for the repayment of the loan liability, etc.

Banks often offer customers a very attractive interest rate or bank commission, but in return the borrower must opt ​​for the so-called cross selling, ie simultaneous use of a bank with other bank products, including bank account or When will the bank return the stolen money from the card?

Parameters valid for loan costs

Parameters valid for loan costs

The interest rate affects the cost of the loan. The interest rate is calculated on a yearly basis and is added to each monthly installment repaid by the customer. The interest rate is the result of the combination of the bank’s margin and interest rate, usually interest rate. Lenders only influence the amount of margin and it is necessary to pay special attention when choosing a loan offer. The interest rate is the variable interest rate component determined by the National Bank. The level of margins is influenced by factors such as:

  • the amount of own contribution (for mortgage loans it is a minimum of 20% of the value of the property purchased),
  • Source of borrower’s income,
  • report on the current credit situation and the customer’s credit history,
  • loan period,
  • cross selling.

Banks also set the amount of commission for granting the loan. It usually amounts to a few percent of the amount of the liability and can be either credited or the customer must pay its own funds before taking out the loan.

What are the obligations of the loan guarantor?

The way to guarantee a credit obligation is a guarantee. What is it and what are the obligations of the guarantor?

 

As a guarantor, the person becomes a party to the loan agreement and thereby agrees to the repayment of the loan or loan if the debtor defaults. 

 

Banks accept various forms of collateral for the repayment of credit or loan obligations. One of them may be guaranteeing a loan. Such security requires the conclusion of an appropriate agreement between the guarantor and the bank. It is a type of loan repayment security by a guarantor, also known as a giraffe, in the event of the borrower’s failure to meet the benefit.

The surety agreement was regulated by the provisions of the Civil Code of April 23, 1964.

 

In art. 876 of the same Code, the essence of the surety agreement was indicated:

  1. Through the surety agreement, the guarantor undertakes towards the creditor to perform the obligation in case the debtor fails to perform the obligation.
  2.  The guarantor’s declaration should be made in writing or otherwise it is null and void. Surety can report only to future debt and is established up to the amount indicated in advance. If it is an indefinite surety, it may be revoked at any time before the debt arises.

Who can become a guarantor?

Who can become a guarantor?

Only adults of full legal capacity may act as the loan repayment guarantor. For this they must have sufficient creditworthiness for the bank. Information about being a guarantor of a loan is recorded in the Credit Information Bureau and may reduce the chances of the guarantor obtaining a loan in the future, until the debtor repays the liability.

 

Obligations of the guarantor

Obligations of the guarantor

When the debtor is late with the payment of principal and interest installments, the creditor should immediately notify the guarantor. The guarantor is responsible for the debt as joint and several debtors. In a word, he must pay the guaranteed debt within the time limit set by the creditor.

 

Cancellation of a surety agreement is possible, but it will require the consent of both parties. The bank will not be willing to do this if it gives a loan to a person who, for example, has insufficient credit standing to be able to take out an unsecured loan.

Loan rolling – what is it and what does it consist of?

Difficulties in loan repayment do not have to be due to negligence or poor budget management. Life circumstances and a sudden change in a financial situation often affect this. Instead of running away from the problem and exposing yourself to the severe consequences of late repayment, you can use the roll-over loan service. What is it about and is it safe?

Rolling loans – what’s up?

Rolling loans - what

Non-payment of loans is a heavy burden for non-banking companies. For this reason, they are trying to suit clients and make it easier for them to settle their debt in a conciliatory way.

One option is to roll over the loan, i.e. to postpone its repayment date. What does this mean for the borrower? It may extend the period for settling the liability, thereby gaining time to accumulate adequate funds to cover the debt.

How does rollover loans work?

When the repayment date is approaching and the debtor has no money to settle the loan, he may request a deferment. Lenders usually allow the extension of the deadline by 7.14 or 30 days. One-time rollover of the loan can be a profitable solution, however, remember that there are additional costs involved.

Continuous extension of the repayment deadline is a simple way to generate large debt that may not be repayable. In that case, how much does a rollover loan cost? It depends on the non-bank company and such a provision should be in the contract. It is worth remembering that not every lender offers this option.

Loan roll-up under the law

Loan roll-up under the law

The high costs associated with extending the deadline have caused many people to fall into a serious debt spiral. The introduction of the anti-usury act has somewhat curtailed the practice of dishonest lenders, limiting the cost of extending the term to a maximum of 25% of the loan value.

For this reason, despite the fact that still receives notifications about usury repayment terms, they constitute a small percentage of the cases handled.

Refinancing and rolling out a loan

An alternative to extending the repayment deadline may be a refinancing service. It involves incurring another liability to repay outstanding debt. What is the difference between these two services?

It is worth remembering that refinancing a loan may depend on your creditworthiness. In the event of an unfavorable history in Credit Checker, another lender may refuse to grant a new payday loan to pay off outstanding liabilities.