People most often resort to consumer loans in the event of a sudden financial emergency. Whether something went wrong, a car, a refrigerator, a washing machine, or the amounts in the accounts climbed to dizzying heights, such situations need to be resolved urgently without much thought. Of course, if you don’t have anyone to help you financially in such a situation, products provided by banks or non-banknotes will come into play.
In this article, you will read what consumer credit is suitable for and how it differs from other products provided by banks, in which they lend you money in some way.
Stricter conditions for obtaining a consumer loan
Since 2018, stricter conditions for assessing applicants for consumer loans have been in place. The most important changes:
- A novelty is the minimum reserve of 15%, which will increase to 20% from July 2018.
- If the client increases the refinanced loan by more than 2,000 dollars or 15%, the bank will check its income again.
- Stress test when the rate increases by 1 or 2% (depending on the loan amount).
- Income assessment based on confirmation from the employer or account statement not older than 3 months.
- Self-employed persons will have to submit a tax return for the last year or account turnovers for the last 3 to 6 months.
The new conditions apply to both banks and non-banking companies, so it will be difficult for people without the necessary financial reserve to obtain a loan from January 2018.
How to become familiar with consumer loans?
Like every product that a bank or non-bank provides, we also distinguish several types of consumer loans from which you can choose.
According to the purpose of use, we know:
- Non-purpose loans – these loans do not require the bank or non-banking company to prove in any way what the money was used for.
- Special-purpose consumer loans – you borrow with a specific intention to use money. You will then have to document the entire amount borrowed to the bank. The advantage compared to non-purpose loans is lower interest by 1-2%.
As part of the basic division, banks provide various types of special-purpose and non-purpose loans:
- Consumer loan for a car – a special-purpose loan is intended for the purchase of a car; other conditions relating to this loan determine which loan it will provide.
- Loan for reconstruction – also a special-purpose loan, exclusively for household reconstruction. The means used must be documented.
- Marriage loan – this loan is intended for newlyweds who became married less than two years ago and the age of the persons is less than 35 years.
- Student loan – this type of loan is intended for students studying at university. This type of finance can be used by a university student for anything from paying tuition to securing housing. However, he starts repaying the loan only after he finishes his university studies.
- Credit card – this loan is also a type of non-purpose loan, but it is drawn through a credit card. In the store, you pay for it and return the minute money in the form of a credit card payment.
- Overdrafts – This type of credit is also drawn by the power of the card, based on movements such as account transfers or card payments made by the consumer on a current account. The bank usually approves the permitted overdraft only for problem-free clients.
- Consumer credit for the purchase of goods and services or installment sales – the company that sells the goods will provide you with the item for the loan that you repay.
Consumer loans in non – banking companies
For clients who do not meet the strict conditions of banks, there are non-purpose and special-purpose loans of non-banknotes. Even in this case, the choice must be carefully considered, as the conditions are less favorable and the total amount of the loan paid can climb to dizzying heights.
Short – term non – purpose loans
For consumer loans from the bank, the maturity starts from 12 months. If you only need a few hundred for a shorter period, you will have to turn to a non-banknote and accept the most favorable conditions. Because the approval process in non-banking companies is less stringent, they can lend you money in a matter of hours. You can usually return them within 30 days, but you can borrow a maximum of 500 dollars.
Be careful when paying due, as there are high fines for violating it or changing the repayment schedule.
Non – bank non – purpose loans
It is the same type of non-purpose consumer loan as in a bank, but the conditions for obtaining it are significantly looser. The maturity period also starts at 12 months and, unlike short-term loans, you can borrow higher amounts.
TIP for reading: It is not worthwhile to solve expenses with a loan, but these 5 cases of a loan are an exception.
What to find out before choosing a loan?
Choosing the right loan is not as easy as it might seem at first glance. The wrong type of loan can strain the family budget even more instead of helping. There are several criteria to consider when choosing the right loan:
- the amount of the installment to be paid per month
- loan amount and repayment period
- options for repaying the loan and collateral options
- the purpose for which you want to use the loan and why a specific loan can be used
The amount of the installment is, of course, the criterion we look at first. However, there may be other conditions behind this that need to be met in order to receive the interest that the bank offers. Today, interest rates on consumer loans vary in various amounts. There are loans for which the interest rate is less than five percent, but on the contrary, there are also those where the interest rate is up to eleven percent.