Credits and Loans
It is known as credit or loans that contract by which a company or individual person delivering money to another legal entity or individual in exchange for receiving some interest and sometimes some commissions and other related products.
The contract involves the person or company that delivers the money that is known as a lender and the person who receives the money called the borrower.
This contract includes all the terms of the financial operation, the amount delivered or capital, the time in which the money must be returned plus interest, the monthly installments agreed, the commissions to be paid by the lender, etc. The type of credit or loan that is requested or obtainable is going to depend a lot on the needs, the situation of financial solvency of the borrower, the amount that is needed and the urgency in obtaining it.
Types of loans that can be requested
Depending on the amount of money we need and the destination we give to cash, financial institutions divide the credits and loans into different modalities.
A first division of the loans to be granted would be depending on the guarantee requested by the bank or financial entity when studying the operation and in this case we could talk about these two modalities:
“”Sometimes it is interesting to extend the Mortgage instead of Requesting a Personal Loan. The interests are much cheaper ”
Loans with personal guarantee:
Personal loans or loans with personal guarantee are those that the bank grants without requiring that we leave in guarantee or pledged any value or goods that can be flats or real estate or also shares and other valuables.
Generally, Loans with personal guarantee are used for amounts up to 60,000 USD and for the use of money in the purchase of consumer goods such as cars, home furnishings, leisure, etc. The maximum term allowed by banks is usually a maximum of 10 years depending on the amount and destination of the money.
Home equity loans:
The loans with mortgage guarantee and even leaving other assets and valuables as collateral are those in which the bank, in addition to the personal guarantee itself, demands that we leave a flat, a car, shares, etc. as collateral. In other words, the credit will be guaranteed for all our present and future assets and income and in case of default, the bank would proceed to seize the pledged or mortgaged assets.
With mortgage loans you can request unlimited amounts, based on the value of the home to be purchased and the financing granted will be limited by 80% of the appraised value of the apartment although there are exceptions with higher percentages depending on income from the appliers.
Other types of Loans that can be requested:
With the rise of the internet and the economic crisis, many online financial companies have emerged that grant the so-called mini-loans or mini-loans through which they grant small loans, generally do not exceed 1,000 USD and deliver cash in less than 15 minutes, hence its name of fast credits.
The biggest drawback of fast loans is the cost of these online financials that in many cases charge up to 3,000% in terms of APR calculation since they charge high interest for short periods of time (maximum 30, 45 days for the return).
The advantage that mini-credits have is the simplicity in the way of asking for them, agile procedures, with few questions and immediate payment of money.
“”Use the Online Financial Fast Loans in extreme cases. Its cost is very high and the return period is very short ””
A variant of these quick loans granted by banks would be the payroll advance. In these cases, if we have the payroll domiciled in a bank, it will be easy to get the equivalent of 6 months of salary quickly and with affordable interests.
Unlike fast loans, the payroll advance loan will have a much cheaper interest and tighter commissions and often without commissions.
Have money with the Credit Card.
Another quick way to get money borrowed is to have the limit that we have assigned on the credit card that the bank will have assigned at the time in a standard way and that we can request the extension of the limit.
Having a credit card in our wallet is to have an instant loan and that can be considered revolving and can be re-arranged once we have canceled previous operations. This form of loan can be arranged by making payments with it in the purchase of consumer goods or having the cash at the ATMs.
Loans between individuals.
Lending money between private individuals is undoubtedly a way of financing before the existence of banks. You can ask for money from another person who may well be a friend, a relative, etc.
However, there are private lenders in the market that are dedicated to lending their money in exchange for obtaining a return that is higher than what they can obtain in a bank. However, this market is usually limited to home equity loans, which is the only case in which these people are willing to take a risk since they would keep the flat as a last resort. In fact, recent news has reported loan operations of unethical individuals and with enough affected people who ended up losing their homes.
Similarly, with the arrival of the internet, there are many ads that appear on classified pages offering money that always involve a scam whose sole purpose is to get a few USD to the most desperate and needy people.
The only way to get money between individuals on the Internet would be registering on P2P platforms or known as crowdlending through perfectly-identified and legalized websites in which individuals who lend their money to those who need cash are contacted.
“” Be wary of Individual Loans. There are many scams on the internet and real lenders only lend with a mortgage ”
Where you can ask for personal and consumer credits
Not only are the traditional banks and Savings Banks where you can get money on credit. Nowadays with the new technologies, you can also find online financing on the internet but taking weak precautions.
Financial companies that lend money:
Banks and boxes of savings:
It is the first place to consult. In banks and savings banks it has the advantage of proximity and trust since they are duly controlled by the economic authorities, in this case, the banking.
In the bank, they have several financing options for each case, both in loans with personal collateral and mortgage loans.
As a requirement, you will have to open an account in the entity and present the necessary documents justifying the income and solvency with the properties if necessary.
Loans between Individuals with internet web
Current technology allows individuals who need money to be contacted with those who are willing to lend their capital in exchange for a higher return offered at the bank.
People looking for money can go to this system looking for a better interest rate, or as an alternative to the bank if in them their operation has not been accepted for various reasons.
The web platforms that group these people are technically known as Crowdlending or P2P Loans.
Financial Online Fast minicredit
Another form of financing that uses the internet is the online financials that grant small loans. Generally, they do not grant more than 1,000 USD and it is very common that in the first application, they authorize only 300 USD.
These operations are known as quick mini loans to be paid in installments with little paperwork and without too many questions.
The main feature is an immediacy and they pay in 10 minutes so they don’t demand too many requirements. In contrast, the interest rate is extremely high in the APR calculation.
Companies and individuals of Private Capital
Private equity companies usually focus on granting money with a mortgage guarantee.
In these cases, they may be willing to grant loans with credit institutions since they will request a flat or house free of charges and the appraised value of the apartment will have to cover the amount of the credit widely.
Typically, they do not grant more than 60% of the appraisal value.
Within this market of private lenders, multiple advertisements appear on the Internet on websites such as milanuncios.com and others that allow inserting uncontrolled advertising that is mostly scams.
Most of these ads come from countries like Benin or Nigeria that ask for small amounts on account for various expenses with the promise that they will send the money. To make it more credible they use the name of more or less known banks.
Interest charged for the Loans
The price of asking for a loan is known as the Interest Rate and along with the commissions and expenses, it is the cost of getting financing.
The interest rate will depend on many factors, such as the amount requested, the term to return, the economic solvency of the applicant and the attached products that are contracted as a counterpart or link with the financial entity.
The interest you hire for the operation can be:
Fixed interest rate
In the case of fixed interest, as its name says, it will always be paid during the entire term of the operation and therefore the monthly fee or letter will not change.
Fixed interest is the most used in personal loans or consumer loans and the variable is exceptionally applied.
The cost of interest at a fixed rate is higher than that contracted at a variable rate although the risk of possible interest increases is eliminated.
At present, the average price of these operations is around 8% in the APR calculation.
Variable interest rates
In the operations at a variable rate with its word indicates, each period of time that is usually annual, the price changes depending on the price of money at each moment.
To calculate the interest of each period a reference is taken. The most used is the Cafinor and a differential is added to that reference. For example, if the Cafinor is at 1.50% and a 4-point differential is contracted with the bank. The interest rate will be 5.50%.
Variable Interest is the most widely used in mortgage loans since they are long – term operations in which case it is difficult to estimate a fixed rate for the entire life of the loan.
In both cases, the banking regulations require a differential between the Nominal interest – TIN – which is the interest without other expenses and the APR – which would be the interest added commissions, expenses and also taking into account the repayment term.
“Always negotiate the Interest Rate with the Bank and consult at least 3 entities. Don’t settle for the first offer ”
Expenses needed to contract a loan
As we have indicated previously, in the regulations of the banking, it is required to publish the APR in which the necessary expenses related to the operation are included in addition to the TIN:
Public Notary Expenses for the Intervention
The loan agreement can be intervened or signed in the presence of a Notary or without intervening, that is, signed with the bank without the presence of a notary.
In the case of being intervened by a notary, this will charge your fees and therefore, increases the cost of the requested money.
Commissions that have a loan
- Opening Commission.- This is a percentage charged by the bank at the beginning of the contract when making the money available to the applicant and is charged only once. The estimated opening commission price will be 0.50% to 2.50%. However, it can also be obtained without commissions.
- Study expenses: Although masked as an expense, it is simply another commission. The study fee can be charged only in the event that the operation is admitted.
- Cancellation commission: Another very common commission on loans is a cancellation that can be partial if prepayments are made or in full if the credit is canceled in full before its maturity.
- Modification commission. In mortgage loans, we can find another commission called modification for those cases that make changes to the original deed throughout the life of the loan such as modification of guarantees or extension of borrowed capital.
Documents Needed to Request a Loan
For the study and analysis of our petition, the financial entity will always request a series of documents. Although there will be some very specific, the generals for these cases will be:
- Copy of the last 3 payrolls in the case of working as an employee or as a salaried employee.
- Copy of the Income Statement – Personal Income Tax – of the last fiscal year.
- Work Contract and/or Report of working life depending on whether it is fixed or eventual.
- Changes to the bank within the last 6 months
- Copy of the DNI or Resident Card in the case of foreigners.
- In some cases, a simple note of the Registry or copy of the deeds to justify the properties.
Banking and Personal and Consumer Loans
The best source where you can report how the Loans work is on the website of the banking itself, where a detailed report of the loan concept is made, which lasts for a loan or repayment time, the different interest rates charged in loans and credit classes offered by financial institutions.
At the time it offers consumers excellent loan simulators to make the calculation of the fee to be paid in each of the modalities and taking into account if there is a lack or without it.
You can find all this information first hand in the Guide to contract personal and consumer loans from the banking.