What is the difference between the title solutions? Which option do you choose to buy home appliances, and which when plans for a general renovation of the property appear? The following text will help you choose a loan that suits your needs and circumstances.
- A cash loan is one of the most popular solutions that allow you to raise funds for any consumer purpose.
- The basic elements affecting the cost of a cash loan are the interest rate and the commission for granting financing.
- A mortgage loan is a special obligation granted for the purchase, renovation or modernization of real estate.
- Taking out a mortgage is a series of additional costs, ie property valuation and insurance.
A cash loan
A cash loan is the name of one of the varieties of consumer credit granted by banks to natural persons. Others are overdraft facilities, a popular debit, car loan, housing loan or credit card debt. The rules of their operation are regulated by the Act on consumer credit of May 12, 2001.
In the case of a cash loan, the lender is basically not interested in what the borrower intends to spend the borrowed funds. In practice, however, a question is asked on what money will be spent. Credit advisers explain that this is related to the bank’s marketing policy, which often promotes specific projects, eg renovation of a flat. Thanks to this, a loan for this purpose may be granted on preferential terms.
On the other hand, one can presume that the lender asking additional questions wants to ensure the correct assessment of credit risk. For the bank, it seems more certain to borrow money for the renovation of a flat or the purchase of home appliances or rtv, than to provide financing for an exotic trip.
This is due to the fact that foreign journeys involve many risks during the journey and there is nothing left to do that could have value in bailiff proceedings. Fortunately, we have not lived to see any time in which memories could be one of the collateral for the loan. Therefore, financing the intangible needs of borrowers is still burdened with a much higher risk for the bank.
When applying for a cash loan, the bank will be interested in the amount, source and frequency of the potential client’s income. Only in the case of cash loans for small amounts (generally PLN 4-5 thousand) borrowed for a short period (usually 2-3 years) is enough to declare income or an account statement.
The simplified procedure is also reserved for representatives of selected professions. For example, medics, lawyers or architects can count on a high amount and extended funding period with minimal formalities. Many years of experience indicate that professional groups based on good repute score much better in terms of timely repayment of liabilities.
Cash loan – costs
The basic costs are the interest rate on the loan (in most cases fixed over the entire loan period, but the contract generally includes entries of a possible change as a result of the deterioration of the situation on the financial markets) and a commission for its granting. In the case of borrowing a dozen, and certainly several tens of thousands of zlotys, you have to take into account the need to provide additional security. It may be a third party guarantee (they will jointly and severally correspond with the borrower for the repayment of the obligation), or purchase insurance in the event of death or loss of employment.
The essence of this solution is to secure the borrowed amount with an entry for a loan in the land and mortgage register of the indicated real estate (the so-called mortgage establishment). Most often, a mortgage loan is taken for the purchase of real estate – a plot, a flat or a house.
A mortgage loan may also be granted for the renovation of a property, construction or extension of a house. There is no obstacle to the obligation being secured by another real estate already owned by the borrower or a third party, if he or she agrees.
Due to the amount borrowed, amounting to even several hundred thousand zlotys, the client is carefully verified in terms of creditworthiness and creditworthiness. The borrower must document income not only of himself but also of potential co-borrowers. The bank also requires an assignment from the property insurance policy. In the transitional period (before the mortgage entry becomes valid in the land and mortgage register), temporary securities, eg a blank promissory note or a surety, are used.
In the case of a mortgage you have to count on many additional costs. In addition to the variable interest rate (determined every 3 or 6 months depending on the “price” of money on the interbank market ) and bank commission, the need to pay an appraisal report, insurance for the period of crediting the real estate being the subject of the collateral, purchase of life insurance and coverage of entry fees is at stake. to the land and mortgage register.
It should also be remembered that until the bank provides information on the establishment of a mortgage, the bank may also charge an increased interest rate. Thanks to many safeguards, the bank significantly reduces its risk, thanks to which the interest rate on the mortgage loan is significantly lower than the cash loan. Therefore, it is worth choosing a mortgage loan when we borrow several dozen or even several hundred thousand zlotys for a long period of time.
Early repayment of the liability in full, as well as overpaying one or several installments, are acceptable for both cash and mortgage loans. Overpaid of the first (provided that fixed installments are used) boils down to payment of multiple installments.
In the case of variable installments or a mortgage with a variable interest rate, the lender must be informed in advance about the overpayment and agree with it whether this operation is to be translated into a shortening of the loan period or to reduce the monthly installments. These activities are connected with the necessity to prepare a new loan repayment schedule.
Pursuant to the act on mortgage loans, loans with a variable interest rate may be charged with an advance repayment commission only in the first 3 years from the date of signing the contract. This fee can not be higher than 3% of the value of the repaid amount. When analyzing a loan agreement, it is worth noting which policy a potential lender applies in this respect.
Each credit decision is very individual. It is taken after examining the client’s creditworthiness and creditworthiness. The Bank analyzes how high the installment can be paid monthly by the borrower, taking into account his income and fixed expenses. Credit credibility, in turn, is the client’s point score made based on the history of repayment of its previous liabilities. Information on this subject can be found in the registers of the Credit Information Bureau.
Clients who reliably meet the repayment of their existing loans can count on more favorable terms of the new commitment. That is why it is important that before starting the loan process, make sure that the correct entries are made in the BIK. People who have not yet used any credit products, even from a credit card or a personal account limit, should run at least one of these products. Preferably a few months before submitting the loan application.
This practice allows you to “earn” a positive credit history. This is very important. Its lack hinders the financial institution from unambiguously evaluating the client. As a result, the bank treats applications of such persons as more risky, which translates into worse financing conditions or, in extreme cases, involves the rejection of the loan application.
Withdrawal from the contract
The provisions give the borrower the right to withdraw from the loan agreement within 14 days of signing the contract. This results from the provisions of the Consumer Credit Act of 2001 and the 2017 Mortgage Loan Act. The borrower should inform the bank about the withdrawal from the contract on print, which must be handed over to him at the time of signing the loan agreement. The return of borrowed money must take place within 30 days from the date of the statement of withdrawal from the loan.
If the funds were transferred to the client before he submitted information about withdrawal from the loan agreement, he must pay interest for the time when he had the money. In turn, the bank has 30 days, from the moment of obtaining information about the borrower’s withdrawal from the contract, for settlement with it from fees charged in connection with the loan, for example commission.
The financial institution will also bear the costs of other non-returnable fees related to granting the loan. In the case of a mortgage loan, it may be the cost of preparing an appraisal report, which was carried out at the request of the bank, not the borrower. Another thing is the termination of the loan agreement during its term. This activity can be performed by both parties in accordance with the conditions specified in the credit agreement.