You must think twice before taking a loan. What is its essence and what exactly do you need to know before making a decision about debt?
According to the reports of the National Debt Register, several million Poles have already borrowed. The debt of our countrymen is increasing every year. Banking institutions offer a very wide range of services. Each of the clients can find something for themselves, but most people choose a cash loan from among the possible ways to commit themselves.
According to statistics, Poles take credit for various things. There is actually no rule here. Those who want to buy an apartment or get a larger amount to build a house usually decide on a mortgage. In most cases, cash is intended for current expenses, a car, home appliances, household furniture, and even holidays.
What is a loan?
Let’s start by explaining what is meant by “credit”. This is an agreement between the bank and the borrower, concluded in writing to be valid. The financial institution undertakes to make available a given sum of money for a specific purpose and period, and the borrower ensures that he will use the funds in accordance with their intended purpose as set out in the contract, and also undertakes to repay the amount together with the interest accrued and all commissions. In Poland, several types of credit can be distinguished: for business entities (revolving, investment) and natural persons. The last of these categories includes types such as a housing loan, i.e. a mortgage or consumer loan, including for example a student loan, in a savings and checking account and just cash.
Cash loan – where to start?
In this text we will focus on the last of these types. First of all, we will consider what to look for when choosing a given offer. The market is full of all kinds of possibilities, banks tempt new customers with promotions and bonuses. We advise you on how not to get lost in it. First of all, you need to specify what we need the money for. Then analyze our financial possibilities in the context of repayment of installments. This is the most important step on the road to making the decision to commit. Be reasonable, not give in to your emotions, and stick to certain rules of informed borrowing. When seeking a fairly favorable offer, let’s not be guided by loyalty to the bank in which we have an account. It often happens that financial institutions care more about new customers than existing ones, contracts already associated with them and mutual interest. So let’s look somewhere further, read reviews on the Internet, a lot of information can also be taken from the credit rankings created by websites dealing with financial issues.
If we decide on an offer, we should go to the bank to do the formalities and first of all check how much money we can borrow. This is not an obvious matter. Our creditworthiness is of key importance here, i.e. in a sense the potential to repay the loan taken together with interest on the dates specified in the contract. Its level is influenced by many factors, among others: the amount of our income, source of obtaining it, current credit burdens and liabilities, age, number of people who we have for our dependence, credit history and finally the type and amount of the loan we apply for, as well as its repayment period. The institution will assess the capacity using a point analysis. The bank will also check us at BIK, i.e. Biuro Informacji Kredytowej SA, which collects, stores and provides data on the financial past of bank customers, credit unions and many non-bank loan institutions. Each of us can check for free if he is on the BIK register. HERE we explain how to do it.
From application to payment
In general, the stages of the loan granting process, in addition to the application and analysis of the applicant’s financial condition described above, include: making a decision by the bank, then signing the contract, payment of the amount specified in it, and later all control activities, such as checking compliance by the bank using the loan with the provisions of the contract. However, the latter is not a cash loan. We don’t have to share with the bank information about what purpose we will spend the money on. It can be renovation of a flat, purchase of a new car, computer, camera or a dream trip to the other end of the world with the whole family.
Cash loan – calculator
What does the interest rate on a cash loan look like? Each offer is different. There is no golden rule here, each bank regulates fees, commissions, total costs etc. on its own. However, there are a few things that you need to be aware of or pay attention to. The first is to see the difference between the commission on the loan and its total costs. In bank advertisements, you can see the slogan that they guarantee zero interest on cash loans, meaning that they do not charge any interest on the amount due. This does not mean that the commitment is free. The bank charges a commission for each loan, which can be up to several dozen percent on the value of money borrowed. Another aspect that should be kept in mind is the type of loan installments. They can be equal or decreasing. Each solution has its pros and cons. In the case of equal installments, the borrower’s total cost will be higher, but on the other hand, he will have the same amount to pay every month, making it easier to plan expenses.
Cash loan with insurance and early repayment
Importantly, the upper limit for granting a cash loan is $ 150,000, and its maximum interest rate may reach four times the lombard rate, i.e. 16%. In turn, the largest repayment period for cash loans is 10 years. Most lenders agree to pay their debts free of charge ahead of schedule. However, it is an individual matter of each contract, it is worth checking this entry, because some banks charge fees if earlier payment is made. As for the additional costs of loans, it is worth mentioning insurance here. The price of the service and its benefits should be analyzed. It may turn out that it will only increase the already high total amount of our loan.
Is it worth getting into debt?
This is not a rhetorical question. Many of us taking credit or loans are associated with falling into financial trouble. However, there is a large group that is in debt for investments or has a rigid and well-thought-out action plan, and the money from the bank will help in its implementation. In most cases, however, there is a personal drama behind the loan and often a lack of livelihood. In addition to loans, there are several other ways to get money.