The loans granted by banks have general conditions that are very similar among lenders. Thus, one of the main characteristics is the amount of money that we can receive through a loan, ranging from a few thousand euros to tens of thousands. Loan repayment terms are also standard, ranging from 1 month to 5 years and, in some cases, up to 10 years.
Among the rest of the general conditions of the loans, it is understood and accepted by both parties that the loan applicant, that is, the borrower agrees to meet the payment terms on a regular basis.
Before signing the loan contract, the lender analyzes the economic situation of the applicant to determine if it is feasible for him to pay the loan without problems.
The documentation necessary to request a loan includes identification and income documents of the applicant. Based on this, the financial institution studies the specific situation of the borrower and, if necessary, requests more documents. If after the loan study period all the requirements are adequate, the entity proceeds to grant it after signing the contract that determines the conditions that both parties must meet.
On the other hand, there are specific characteristics that can vary in each loan. These types of conditions depend directly on the reason for which the borrower requests the loan and the purpose that the capital is going to give. In this context, there can be many reasons, from the purchase of a durable good or not, the financing of studies, etc. This is the reason why there are so many types of loan for each client's purpose.
Regarding the characteristics themselves, we can define the following as the most common:
- Documentation: As its name indicates, these will be the documents that we must provide to the bank before formalizing the loan. I recommend that you read the documentation to provide when requesting a loan
- The interest rate: In summary we could say that it is the amount of money that the entity is going to charge you for the service of lending you the money. I recommend that you go to our article on interest rates on loans
- Amortization: The action of paying a debt by paying the installments is what is known as amortizing. You can go to ourarticle on repayment terms , where you will find more extensive information on payment terms.
- Commissions: Amount of money that a financial institution receives to cover the management expenses that a loan entails. Here you have more information about commissions on loans
- Non-payment: Little to say about this aspect, but you have incurred in default, you will be interested in ourpost on garnishment for non-payment
Differences between credits and loans
Very often, the terms loan and credit are used interchangeably to refer to the situation in which an entity lends money to a person who is responsible for repaying it within the agreed term. Despite this widespread habit, there are some notable differences between the two terms that should be taken into account in order to gain a better understanding of financial services.
On the other hand, credits can be renewed on successive occasions without this entailing a great deal of paperwork. On the contrary, a loan must be paid in full and to request another it is necessary to sign another contract. This is one of the big differences between these two concepts .
In addition, each type of service is oriented to a different use. Typically, loans respond to a consumer's need for consumption while loans are made so that the customer can make payments that they could not otherwise make.
The differences between these two terms should be taken into account , although it is true that they are often confused as synonyms. The online lender system so in vogue currently grants credits, since both the amount and the repayment term are limited and reduced. In addition, these small credits or microcredits respond to the economic needs of individuals, and even small companies. They are generally requested to make payments, make purchases, or pay for services.
Today, getting a loan is complicated due to the numerous restrictions of banking entities. However, it is possible to get loans in these same entities or resort to theonline microcredit system to get out of more than one trouble in times of crisis.
In personal loans, for example, no endorsement is required but in others, such as mortgages, the same asset whose purchase is the purpose of the loan is the guarantee. The specific conditions are determined by competition between financial institutions, as they all want to give attractive offers to customers. The offers change every season and are adapted to the needs of customers.
Due to the crisis, some personal loans are currently more difficult to obtain and applications have dropped considerably. This is because entities cannot afford the risk of lending money to individuals who may default and have therefore been forced to restrict concessions.
Factors that determine the type of loan.
Before applying for a personal loan, it is highly advisable to inform yourself a great deal to make an appropriate decision. There are many offers in the creditor entities to cover the needs of all clients and, therefore, it is our duty to find the one that best suits us. Otherwise, we could lose large long-term benefits or not take advantage of all available facilities.
In the first place, the purpose that we are going to give to the capital we receive determines the options that the entity offers us. You also have to carefully consider the amount requested and the term for repayment of the loan, since the interest that we are going to pay to the entity depends on it. The payment term is decisive in the price that we are going to pay for the loan as commissions.
When we have determined the type of loan, that is, the purpose for which the money we need serves, we must resort to comparators ourselves. This allows us to see the advantages of requesting a personal loan from one entity or another since the commissions and characteristics are not the same in all entities. We must dedicate the necessary time to this step to be able to decide effectively. The difference can be a few euros, hundreds of euros or even thousands at the end of the life of the loan depending on the amount borrowed.
Another of the determining factors when hiring a loan is the interest rate. It is very tempting to blindly opt for the lowest interest rate, since we may think that this factor necessarily determines that the commission will be lower. However, this is not true. The payment term of the loan has a great influence and not only does the interest rate. In other words, it is not the same to finance one year than five years, depending on the amount that is lent to us.
The best thing to do is check the numbers ourselves or enlist the help of someone who can clearly explain what the loan will cost us . In general, we will have to decide between a few options, perhaps only two at the end of our decision period about the loan we choose and, in this step, it is crucial to know the price that each of the options represents for our pocket . As a final step, it is advisable to check that we will have enough money to pay the installments during the duration of the loan.
So far today's article. We remind you that you can visit the home page of our website test.com to keep up to date on everything concerning this type of financial products.