What credit we will be able to get in a bank is mainly influenced by what we want to spend the funds obtained in this way and what is the guarantee of the commitment made by us.
If we want to take a loan from a bank, we must take into account certain formalities. First of all, the potential borrower is required to collect various documents: confirming our data, talking about earned income, creditworthiness.
If we decide to take out a loan, we must take into account additional fees that the bank will impose on us. In addition to the interest rate, the borrower also often has to pay a commission fee. In times of crisis and high risk, banks also require insurance against unemployment.
When deciding to take out a loan, let’s review many bank offers and choose the most favorable, based on the best conditions.
What is credit at all?
The mass media are flooding us with a huge amount of ads of various types of loans, offered by various, smaller and larger banks, for different purposes and on different conditions. What is credit though?
A loan is a transfer of funds by a bank, or lender, to a customer, i.e. a borrower, or to an account indicated by the customer, e.g. a seller of goods, a service provider. Credit is also referred to as monetary debts incurred in a bank for a specific purpose and time, for a specified percentage.
Granting loans is one of the basic tasks of the institution, which are banks. The loan is granted to borrowers on the basis of a loan application submitted in the bank and documents certifying the client’s income. To grant a loan, the bank must assess the applicant’s creditworthiness on the basis of these documents. Whether we get the loan we apply for depends on whether the bank issues a positive opinion on this matter.
Creditworthiness means the borrower’s ability to pay back the debt incurred along with interest due over a specified period of time. Each loan, be it a cash loan or a consolidation loan, is granted for a specified period of time as well as for a specified percentage.
At the time set out in the contract by the bank, the borrower undertakes to return the money borrowed from the bank together with interest due. The loan agreement, for loans such as a mortgage or car loan, must also include the purpose for which the funds obtained from the loan may be transferred.
A bank loan can take many forms. It may involve, for example, transferring to the bank account the amount for which the loan was taken or part of it, in which case interest due will be deducted immediately. Another way is for the bank to cover the disposal of the unit up to the set amount.
Before signing the loan agreement, pay special attention to the loan amount, its total cost, i.e. the amount of contractual interest, commission, insurance, additional fees, etc., the length of the loan period, i.e. the number of loan installments, interest rate, the withdrawal period and its terms, as well as early loan repayment option.
Who is the borrower?
A borrower is any person who has incurred a financial obligation called a loan at a bank or other institution.
Various types of loans offered by the bank are for people of different ages, with different incomes and working in different positions. Loans of various types, be it housing loans, mortgage loans or consolidation loans, as well as cash loans, can be granted to different people.
However, some types of loans are directed to specific persons or entities. This is the case for corporate loans and student loans.
The loan is intended for practically everyone. However, the basic condition that must be met by a person who is applying for such a benefit is having creditworthiness, i.e. having a permanent source of income that will guarantee repayment of the contracted liability along with interest due within the time specified in the contract.
Therefore, a borrower may become primarily a natural person who receives remuneration under an employment contract. The loan may also be granted to a person employed under civil law contracts as well as contracts. The credit can also apply to pensioners, as well as those who receive retirement benefits.
A bank loan can also be applied for by people who run a business
Regardless of how they settle accounts with the Tax Office, i.e. both people keeping a book of revenues and expenses, as well as people paying a flat-rate income tax or settling in the form of a tax card. Borrowers can also be people earning income from rent or lease, as well as farmers.
Civil law partnerships, unincorporated entities, and commercial law companies can also apply for various types of loans.
When we sign the loan agreement, we automatically become borrowers and we are required to repay the loan along with interest within the period specified in the agreement.