Monthly Archives: September 2019

What to know before taking a cash loan?

Borrowing money is always associated with great responsibility, numerous consequences and sometimes consequences. Borrowing money from a bank is much more complicated, subject to numerous laws and regulations, and penalties for repaying a loan too long. It is better to find out in advance about everything about cash loans before you put yourself against the wall.


Credit formalities

credit application

Cash loans, unlike cash loans, can only be granted by banks and financial institutions. Due to their rather low amounts, they are granted for shorter periods than mortgage loans. Usually they are from a few hundred dollars to a dozen or even tens of thousands. Larger amounts of several hundred thousand are usually offered only to companies that meet the higher requirements that the bank will set for them. Taking into account all borrowers, the highest achievable value of cash loan is $ 150 thousand, and the longest repayment period up to 10 years.

Because they are granted for a much smaller amount, they do not require as much security as a mortgage. Despite this, the bank must check the applicant’s creditworthiness, the amount of his remuneration, and in the case of larger amounts can ask for a co-borrower, credit insurance, a guarantor or a pledge in the form of a car or real estate.

You can apply for a loan by phone, online or at a bank branch. Often, the bank’s regular customers get the biggest discounts, but it’s worth checking the conditions at various institutions.

The necessary documents will be an ID card and income certificate. The employment contract is rated best, but the commission contract and proof of regular payments do not compromise your credit chances. However, the larger the loan amount, the longer it will take to process your application. It is often even a few days. With less capital, it is limited to one day or even several hours or minutes.


Consumer Credit Act

Consumer Credit

Cash loans are limited and defined by numerous acts. The most important is the Consumer Credit Act. It provides us the opportunity to withdraw from the contract within 14 days without any consequences. At the same time, it guarantees us the right to repay the entire loan ahead of time without incurring additional costs. This is consumer protection because it is much less profitable for a bank to pay back a loan faster. The difference in insurance and commission fees due to the change in the repayment date should be returned to the customer.



The interest rate is constant throughout the deposit period

The most important thing to check when taking a loan is its interest rate, because it is this percentage that shows how expensive the cost of the loan will be. Its maximum value is four times the Lombard rate (16%). Often, commissions, margins and insurance costs are added to this amount, so the interest rate itself does not determine the final installments.

We can choose fixed or variable interest rate. Fixed interest is much more popular because it increases the chance of getting a loan. Creditworthiness is calculated on the basis of the first installment, which in the case of a fixed interest rate is lower than in a variable rate. Installments in this case are always the same, although the interest-capital ratio changes in each subsequent installment.

Floating interest consists of a constant margin and a variable market situation. If the interest rate on the interbank market changes, the interest rate will increase or decrease.

Car or cash loan

Usually, when deciding to buy a car with the help of a bank, we often reach for a car loan because banks usually offer such a loan. However, there are other loans that can also help us implement our plans to buy a new car. An alternative to car loans is, for example, cash loans. This type of loan can be found in the offer of every bank because it is a basic banking product that does not require borrowers to set up repayment guarantees.

A characteristic feature of a cash loan is that we don’t have to show the bank what we want to use the money for and we can spend it exactly on what we want. In the case of car loans, this is exactly the case, at the stage of applying for a car loan, we must determine what we want to buy for this money and the bank will not give us more than the potential car will cost. For this reason, if we want to first finance the investment in our own vehicle and only then look for it, we should choose a cash loan.

Very often when deciding to buy a car, we ask ourselves which loan to use for car or cash. As it turns out, both can be used to buy a new or old car.


A cheap car loan is definitely more profitable

car loan

As it involves lower costs for the customer than it does with a cash loan. This situation is due to the fact that banks, by granting us a car loan, have a number of different collateral in the event of non-repayment, i.e. in the event that we get through to pay off our debt.

As for this type of collateral, they are usually a registered pledge, appropriation of collateral and assignment from the AC policy. As it turns out, a cash loan has a much higher interest rate, because it does not have as much collateral as a car loan, which is why banks must protect themselves in the event of our lack of repayment and it must be simply more expensive.

As it turns out, we can not always take a car loan to buy a used vehicle over the age of 10 or 15 years, while with cash loans there is no problem to buy an older long-term car. When buying a used car with a car loan, we must expect a significantly higher interest rate on the loan than when crediting a new car.


Another option is leasing

Another option is leasing

In other words, a type of lease, i.e. nothing else than renting a vehicle. Leasing involves the right, but not the obligation, to buy a car after the end of the leasing contract. In this case, two solutions are possible: financial leasing very similar to a car loan and

operational leasing is treated as a service. The difference between leasing and car loan is that in the case of leasing you will need your own contribution.