Author Archives: Tom Morales

What to Look for When Choosing a Loan?


What to look for when choosing a loan?

What to look for when choosing a loan? Green guide

In the era of such wide access to various forms of financing and such high competition on the market of credit services, it is sometimes easy to get lost. How do you know which loan will be the cheapest, since every ad convinces that the offer of this or that bank is the best of all? Contrary to appearances, choosing the best loan is not difficult. You just need to know which elements to pay attention to.

You do not have experience with loans? Or maybe you already have a few paid off contracts, but this time you want to consciously approach the analysis of bank offers to choose the loan that is truly the cheapest?

If you care about the lowest contract cost, you have to pay attention to the following:


The commission on the payment of the loan is a one-off fee, charged by the bank in advance when transferring money to the borrower. The best offers are 0%. However, it is not worth assuming that every loan with a 0% commission is cheap. Its profitability can be assessed only after adding up all the costs that the borrower will be obliged to pay in connection with the loan agreement.


The system of repayment of installments

Interest is the basic cost of the loan, which is regularly added to each installment. The amount of interest that will apply in individual months depends on two factors:

  •     nominal interest rate set by the bank in the loan agreement,
  •     the method of repayment of installments (equal or decreasing).

Although the repayment of the majority of cash loans is based on equal installments, it is worth mentioning an alternative, cheaper option to settle the amount due, which are decreasing installments (popular in the case of mortgage loans).

When we choose equal installments, each month their amount remains the same. All because the proportions of the principal and interest portion of installments change every month. With the passage of time, the share of capital (or the amount we borrowed from the bank) increases in them, and the share of interest decreases. In short, at the beginning of the repayment period, we pay back to the bank mainly interest, and at the end mainly capital.

In the case of decreasing installments, each installment contains the same capital part, and with the debt default, the interest value decreases (interest is charged on ever lower amounts). If we took out a loan of PLN 1,000, which we will pay in 10 installments, each month we will return the bank for PLN 100 from borrowed funds + interest on the amount to be refunded.

Accounting for this system, in the end we will pay the bank less interest than in the case of equal installments, where we return the borrowed capital more slowly to the bank, so despite the identical duration of the contract interest is calculated in individual months on higher amounts of current debt.

So if you care about the lower cost of the loan, ask the bank if it makes the offer available in the system of decreasing installments. Remember, however, that the initial installments will be higher than those that will apply if you choose equal installments.


Fixed or variable interest

Fixed or variable interest

Nominal interest rate is given in loan agreements on an annual basis and consists of two elements:

  •     margin (it is a fixed part of the interest) and
  •     base rate (for most PLN loans it will be WIBIR 3M).

If the margin remains constant throughout the duration of the contract, the amount of the base rate changes in the periods it concerns. In the case of 3M WIBOR, the interest rate is for a 3-month period (hence the term “3M”), so it will be updated every quarter. This means that every three months the nominal interest rate of our loan may change, and thus we must be prepared to change the amount of subsequent installments.

If we do not want to expose ourselves to fluctuations in the amount of installments, we can opt for a loan with a fixed interest rate. Thanks to this option, regardless of the financial situation in the economic market and irrespective of changes in market rates, the interest rate on our loan will remain the same throughout or within its entire repayment period (eg in the case of mortgage loans the interest rate is only valid for the first 5-10 years of the contract duration) ). Unfortunately, for this privilege, you often have to pay extra – with a higher interest rate.


Insurance premium

The bank may propose to the customer to purchase non-obligatory loan insurance, but it may also require the conclusion of a contract of the selected policy type under a specific credit offer. However, it is worth remembering that the client decides where and from whom to buy the right policy – he does not have to use the bank’s offer.

Usually with cash loans there are two basic types of insurance: in the event of death and loss of employment. Insurance premiums can be charged one time in advance for the entire duration of the policy agreement (in analogy to how the loan commission is charged) or added to the loan installments.

Some insurance offers are constructed in a way that combines both types of premium regulation, eg for the first year of loan repayment they are charged in advance in a one-off form, and after the expiry of 12 months subsequent premiums are added to installments.

When signing a loan agreement with insurance, it is worth making sure what the total insurance cost will be, because in many cases (especially offers with a 0% commission), the insurance premium may be the main cost for the borrower.

Payday Loans Installment

5 tips that loan applicants should take into account


A payday loans installment is usually a classic payday loan with many uses.

Whether debt repayment, realization of a project or purchase of a product – the reasons why the consumer decides to install an installment payday loan can be manifold.

In the end, however, all installment payday loans have a common denominator: the monthly installments paid as part of the payday loan provide for the repayment of funding – however, the rates, terms and interest rates may vary, depending on the provider and contract.

Anyone who is interested in a payday loan installment, however, must make a comparison of the different payday loan offers in advance; only then can the consumer be sure that he has chosen the best offer.


Why does the consumer opt for a installment payday loan?

Why does the consumer opt for a installment payday loan?

A new car , a luxury holiday trip, new pieces of furniture or even a new smartphone – over and over again the consumer realizes that the savings are not enough. Sometimes a repair can be higher than expected ; Electricity or heating costs can sometimes be a financial challenge.

In the end, the realization remains that the money, which perhaps rests on a call money account, is not enough for the outstanding claims to be settled. One possibility is the installment payday loan.


Which conditions must be met?

The creditor must have a regular income, be at least 18 years of age, and not have a negative entry in the (“Collective Protection payday loan Protection Group”). As a result, the amount of payday loan applied for can not lead to a financially difficult position for the creditor, so he must be able to demonstrate to the bank that he can easily pay the monthly payday loan installments due on the payday loan.

Collateral may also be advisable if the payday loan applicant applies for a higher sum – the most popular collateral is life insurance or even a guarantor (co-applicant).


The total burden

Before the payday loan applicant decides on a payday loan, he should make a comparison . In the payday loan comparison, however, it is important that he not only focuses on the interest rate – also the overall burden plays a not to be underestimated role. The total burden reveals to the prospective borrower namely, what sum he will actually repay in the end.


Variable or fixed interest rate?

Variable or fixed interest rate?

If the borrower chooses a variable interest rate, this is based on the key interest rate of the European Central Bank. If the policy rate is low, the monthly payday loan rates are low – increases the prime rate, so also increase the monthly installments.

An advantage is the fact that the payday loans, which have variable interest rates, can also be redeemed prematurely – in the course of a special repayment.

The fixed interest rate is based on the allocation of the prime rate, which in the end has no influence. The interest rate remains unchanged over the entire term. For example, before the first payday loan installment, the borrower knows what his last monthly payday loan installment will be .

If the key interest rate rises, the monthly payday loan rate remains unchanged – so the borrower can look forward to it. If the prime rate falls, then the borrower must take note that it does not benefit; So he has to accept the (usually) higher interest rate.

Special repayments are usually possible but not effective if the interest rate is fixed: the borrower must also pay the interest that still accrues, so that he has no advantage if he repays the payday loan before the regular end of the term.


The purpose of usage

Banks also offer installment payday loans with purpose. If a new car to be purchased, it is advisable, if the consumer decides for a “car payday loan”.

Assigned installment payday loans are cheaper than those financings that are “free to use”. If the creditor is uncertain about what he wants to use all the money for, he should always opt for a non-promissory payday loan.


The longer the term, the higher the overall burden

If the consumer chooses an installment payday loan and applies for a sum of 25,000 euros, with an interest rate of 4 percent, the monthly installment amounts to 460.41 euros , provided that the applicant has opted for a five-year term , The total burden amounts to 27,624.60 euros.

If the borrower would opt for a three-year term, he would have to pay a monthly sum of 738.10 euros, but the total burden would be only 26,571.60 euros – the borrower will end up saving 1,053 euros. The shorter the term, the higher the actual savings.


5 tips that payday loan applicants should take into account


1. Create a financial plan

The payday loan applicant should add up the monthly expenses and revenues and at the end subtract the expenses from the revenues. Subsequently , the applicant gets an overview of the maximum monthly mortgage payments.

As a rule, the payday loan line should not devour more than 50 percent of the available revenue.


2. Compare offers

Each bank offers a installment payday loan. That is why it is important that the different offers are compared. However, the interest rate only plays a subordinate role here – much more important is the overall burden at the end of the repayment term. Of course, the details should also be considered.


3. Pay attention to details

Is there a possibility of a special repayment? Which collateral must be presented? Is a residual debt insurance required? Sometimes there are details in the contract that the payday loan applicant does not agree with . If the applicant is uncertain, he should contact the responsible bank and carry out renegotiations.

Only then, if the applicant is 100 percent convinced, he should also sign the payday loan agreement.


4. The payday loan

Foreign banks offer a debt-free payday loan . However, this does not mean that the institutions waive their payday loan rating. Although the does not play a role in the end, the foreign banks concentrate on the income situation and also on the overall economic situation of the applicant.


5. The online payday loans installment

5. The online installment payday loan

Online banks also offer payday loans installment. In many cases, the online banks convince with cheaper fees and more attractive terms. Anyone who is interested in an installment payday loan, should therefore by no means ignore the online offers!

Under a installment payday loan for everyone the banks usually understand a lending without general exclusions, which is possible even in very difficult cases.

These concern freelancers and the self-employed in some financial institutions and temporary workers with a large number of banks.

It goes without saying that a fundamentally different approach to lending does not preclude the bank from undertaking a thorough payday loan application check. It is even obliged to exclude over-indebtedness from its payday loan customers.

In addition, banks must deposit high- risk payday loans with above-average equity capital . In terms of income level, banks that lend out a payday loan to anyone give a sufficient monthly payment for repayment.

At low payday loan rates, which can be achieved by a long term, the labor income may be lower than the exemption limit for wage garnishment.

Entrepreneurs and freelancers therefore take care when borrowing for private purposes from which banks they are welcome as lending customers .


Fixed-term employment contract

People with fixed-term employment also do not receive payday loan from many banks. The reason in this case is the uncertainty as to whether the employment relationship will then be continued .

On the other hand, a permanent contract of employment also allows the employer to terminate work as well as behaviorally, whereas the employee may resign at any time, even without stating reasons.

An open-ended employment contract temporarily offers even additional protection against dismissal, as an operational discharge is not permitted during his term.

More and more payday loan banks are recognizing this situation, so they agree to the lending to applicants in fixed-term employment contracts.