What benefits does the borrower have for a consumer loan?

 

Consumer credit is a special type of loan that has been fully regulated, granting it rights, rights and obligations of the parties to the loan agreement or repayment rules. The Consumer Credit Act gives many rights to the borrower. What?

 

The right to obtain credit terms and repayment schedule, withdraw from the loan agreement and terminate it – these are the basic benefits that the Consumer Credit Act gives to borrowers. 

 

What is consumer credit?

What is consumer credit?

Pursuant to the provisions of the Act, a consumer credit agreement is a credit agreement in the amount not exceeding USD 255 550 or the equivalent of this amount in a currency other than the currency, which the lender grants or promises to grant consumer credit to the consumer in the scope of its business activity. At the same time, a consumer loan agreement can also be any loan agreement not secured by a mortgage, which is intended for the renovation of a house or apartment in the amount of more than USD 255,000.

The consumer loan agreement will include:

  • credit agreement, concluded on the basis of the provisions of the Banking Act,
  • loan agreement,
  • revolving loan agreement, etc.

For example, if a loan is granted free of charge, without accruing interest or other charges, it will not be legally considered a consumer loan.

 

The borrower’s basic rights

The borrower

The conclusion of a loan agreement, which in law will be considered as a consumer loan agreement, means that the borrower receives numerous benefits. Already at the initial stage of applying for such a commitment, he has the right to receive a free draft contract at his request, which will take into account all the conditions for its granting. After granting the loan, the customer who has entered into a fixed-term loan agreement has the right at his request to receive the repayment schedule of principal and interest installments at any time.

 

A very important benefit for a customer taking out a consumer loan is that he can terminate the revolving credit agreement at any time, without additional charges, and the parties may specify a notice period of not more than a month in the agreement.

 

In addition, the consumer has the right under the existing provisions to withdraw from the consumer credit agreement without giving a reason within 14 days of the date of the contract. This period begins on the day of conclusion of the credit agreement or on the day on which the consumer receives the terms of the agreement and information on the right to withdraw or not.

Conditions for obtaining a cash loan

A cash loan from a bank or credit unions is intended for customers who have a sufficiently high creditworthiness and are creditworthy, which can be confirmed in the credit databases.

The most important creditworthiness

The most important creditworthiness

A client applying for a cash loan at a bank or credit unions will be able to receive such financing only if he has sufficient creditworthiness. It identifies with the ability to repay the commitment made – the capital and accrued interest, according to the deadline specified in the contract.

The consumer is affected by how much he earns and how much he spends. Therefore, when applying for a cash loan, the amount of income and indicate from which sources they are obtained. Stable income, significantly exceeding the monthly expenses related to the maintenance of oneself and the family, apartment or car as well as the repayment earlier Loans and borrowings have been increased, increasing the chance of obtaining the cash loan in the desired amount.

Credit credibility

Credit credibility

No loan, including cash, may be granted to a customer who has had significant delays in repaying previous commitments and not to pay them and turned out to be an unreliable debtor. The bank can easily check this in the databases of the Credit Information Bureau. Credit checker submits a report along with point analysis, so-called scoring about a person. If the entries in the BIK about the potential borrower are positive, it will speed up the granting of a cash loan. Similarly, negative entries will mean that the customer will not receive a bank loan.

Application for the basis for the credit procedure

Application for the basis for the credit procedure

The bank will not start analyzing the customer’s creditworthiness or creditworthiness at all unless it starts a formal procedure to apply for the desired cash loan. This usually involves submitting an application for a loan together with a set of documents:

  • a document confirming identity – an ID card, passport,
  • certificate of the amount of income received.

Some banks require you to submit, for example, the last PIT settlement of the client or an account statement from the last three or several months. On the basis of the loan application and customer documents, the bank performs the credit procedure and finally issues the decision to grant a cash loan or reject the application.

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.

Bank loan without a salary certificate is it possible?

Banks have a restrictive approach to estimating and checking customer creditworthiness. Therefore, in most cases, when applying for a loan from a bank, a certificate of income should be presented. Can I take a loan without such documents?

 

Quick loan without certificates.

Quick loan without certificates.

Banks offer loans without earnings certificates, although these are not loans without an assessment of creditworthiness and creditworthiness. These certificates are replaced e.g. with the history of the bank account or confirmation of the submission. 

 

A popular banking product

A popular banking product

Cash loan is a product that you can find in practice in almost every bank. It allows the implementation of any credit purposes and in this respect resembles a cash loan granted in a non-bank system.

With cash loans, banks check the customer’s credit history at the Credit Information Bureau and calculate their creditworthiness. Most often, such calculations are carried out on the basis of earnings certificates of the potential borrower. However, there is a chance to get a loan from the bank and not have to provide such certification.

 

Other grounds for granting the loan

Other grounds for granting the loan

Not only the earnings certificate can allow the bank to estimate the customer’s creditworthiness. If it is a person who has a long history of cooperation with a given banking institution, the verification can be carried out using the account history. In this case, the customer can even count on a loan without certificates , because the bank after applying for a loan will simply reach for the history of operations performed on the borrower’s bank account. If the receipts are high enough for outgoing transfers or standing orders, then most likely such a customer will have creditworthiness.

 

Even if the customer does not have an account at the bank in which he is applying for a loan, he can make such a commitment by submitting together with the loan application an extract from the last few months of the account history in another bank. Sometimes you will need an extract from just the last 3 months to get a cash loan.

 

You can also take a bank loan based on your tax return. The bank asks the client submitting the loan application to attach to it an attachment in the form of a copy of the tax return submitted to the tax office. This is a source of information about a person’s annual income, which is why it can be used to estimate creditworthiness just as effectively as a certificate of income.

Mortgage and home construction loan – not necessarily the same product

 

The purchase of a flat or single-family house and the construction of a residential property are investments that involve high costs. They can be covered with a loan, and most often it is a mortgage. A dedicated loan product for home builders is a home construction loan. Are both loans different?

 

Home construction loan – how is it different from a mortgage?

Home construction loan - how is it different from a mortgage?

A mortgage is easier to obtain, does not require so many formalities and is usually paid once by the bank . A construction loan also usually has a mortgage security, but requires the submission of several construction documents along with the loan application , and the payment is made in tranches. 

 

Universal use of a mortgage

Universal use of a mortgage

A characteristic feature of a mortgage is that it is incurred for housing purposes and the collateral for repayment is the entry of a mortgage for the bank in the land and mortgage register of the real estate. Mortgage loan incl. We will finance:

 

  • purchase of an apartment on the secondary or primary market,
  • purchase of a single-family house,
  • purchase of cooperative rights to premises,
  • purchase of a construction plot, etc.

It is clear that the mortgage can be used in a number of different ways, but the purpose of the loan should be indicated in the loan application and in the loan agreement.

 

Loan for building a house – one goal

Loan for building a house - one goal

 

On the other hand, when taking a loan to build a house, the bank obliges the borrower to use the loan in this way.

 

Formal procedures

 

What distinguishes a mortgage from a home construction loan is the formal procedure. Banks with construction loans require submitting more attachments. In addition to certificates confirming the client’s financial standing and allowing the assessment of his creditworthiness, construction documents are required for a home construction loan, including:

  • building and land development conditions,
  • building permit with a stamp,
  • construction project,
  • construction diary with the entry of the construction manager,
  • estimate,
  • valuation of an appraiser or bank employee.

All procedures related to taking and using a loan to build a house are more complicated than in the case of a mortgage. With a mortgage, the bank pays money from the loan to the seller of the house or flat, and the property purchase transaction can be closed in a relatively short time. On the other hand, servicing a loan for building a house lasts for years. All because the mortgage is usually issued once, and the loan for building a house is paid in tranches, along with the progress of works, which are monitored by an inspection sent from the bank.