Conscious borrowing. Find out what credit tricks banks use

Low interest rate guarantees cheap credit? Additional loan insurance will protect you if you cannot pay the installments? Walking around banks reduce your chances of getting a loan? Find out how it really is. We invite you to read.

In the mind of a typical Kowalski cash loan “> cash loan is an uncomplicated transaction. For example, we are interested in the amount of $ 10,000. We sign the contract, then in cash or by transfer we receive the requested amount. Monthly, we give subsequent installments, which include capital and interest. In practice, however, the whole thing turns out to be not so clear.

We must be aware that something else is a typical bank loan, a loan granted in one of many SKOKs and a completely different non-bank loan granted by the so-called payday loans. In marketing activities it has been accepted that a feature that distinguishes a product from the competition is always exposed. Therefore, there are such paradoxes that a loan with a lower interest rate is sometimes ultimately more expensive than its competitor, which has a higher interest rate, but with less additional costs.


Insurance – actual protection or unnecessary cost?

Insurance - actual protection or unnecessary cost?

It must of course be said that in some cases credit insurance is compulsory and we do not have much room for maneuver. However, even if we sign such a contract, it’s good to know what terms we agree to. In its assumption, the insurance policy is to protect the borrower in case he cannot repay his installments, e.g. due to serious illness, job loss etc.

The proverbial devil is in the details. The first detail is the so-called exclusions, i.e. situations in which the liability of the insurance company will not apply. E.g. employment requirement under an employment contract and someone works on the basis of a civil law contract (mandate contract, contract for specific work).

Contrary to appearances, the example presented above is not uncommon. Therefore, it is always worth familiarizing yourself with the general terms and conditions of credit insurance (at this point the bank has the obligation to provide such terms to us before concluding the contract). However, if you really need insurance, you can buy a policy outside the bank loan agreement and thus save a considerable amount of money.


I have any chance of getting a loan?

I have any chance of getting a loan?

Yes. At this time, virtually any bank can receive money by presenting a work contract or a mandate contract. However, we must reckon with the fact that the terms of the loan will be less favorable than those presented to people working under the Labor Code.
The first visible difference is the period for which we can make the commitment. Usually it depends on the time for which the contract for the task or work was concluded.

The difference is significant because the repayment period for a “full-time” loan can be up to two years, while for a person with a civil law contract sometimes only twelve months.

The source from which we receive income is a key element of the so-called credit rating, i.e. popular scoring. It depends on him, for what period we will receive the loan, in what amount it will be and how much costs we will incur in connection with its taking. A useful example of division is taking various periods of employment. For example, if we have an indefinite employment contract, the employment period is only three months, for a fixed-term contract it is six months. In the case of civil law contracts, this period is extended to twelve months, and persons running their own business are covered by a two-year period. It boils down to the fact that if someone has a shorter seniority, the amount of money requested will not be received.

The life of a “non-full-time employee” is also not easy when it comes to formal matters related to taking out a loan or credit. In addition to the employment contract itself, it is necessary to provide additional documents, e.g. tax return in the form of PIT for the last year.


If not a bank loan, what?

If not a bank loan, what?

In view of the state of affairs described above, it should not come as a surprise that people who do not have sufficient creditworthiness (in the bank’s assessment) direct their steps to private loan companies.

The loan policy of this type of financial institutions is quite diverse, e.g. most of them do not check the information contained in the Credit Information Bureau (they receive information about our liabilities, repayment history, etc.). Therefore, it is easy for a loan applicant to fail to indicate the real amount of his debt and to get a loan he cannot pay back.

A significant number of “payday” companies operate online. Fast loans over the internet have won a large number of satisfied customers who very often without realizing the costs that they are obliged to incur. It should be remembered that the immediate receipt of cash always involves an increased risk for loan companies. Therefore, such a loan is simply more expensive. Until recently, the APRC (Real Annual Interest Rate) of the average payday rate was even several thousand percent, and this was not surprising. Currently, after the amendment to the regulations, the maximum sum of costs is determined by a special formula.


Comparing loan offers and lower rating in BIK.

Comparing loan offers and lower rating in BIK.

Sometimes, when looking for savings, we look for the best credit offer for ourselves, and therefore visit many bank branches. Theoretically, this is a reasonable move, but in practice it can harm us. The main thing is that each submitted request for a loan reduces our credit score (there are no rigid guidelines, but usually it is from a few to several points down). In addition, a bank analyst, seeing our efforts through a preview of the BIK report, may assume that “something is wrong with us”, that we ask in many banks and we have not received the requested cash in any of them. In a word, an excessive number of inquiries may result in the fact that ultimately we will not receive the loan or the conditions presented for us will be much worse.

However, it must also be said that the decision to receive a loan consists of several premises and we can generally divide it into four groups. The first and most important of these is the quality of loans, i.e. how we pay our current liabilities. The second group is our credit activity, i.e. how many liabilities we currently pay and how often we took out loans in the past. Next, the fact that credit limits are used on personal accounts is taken into account. The fourth group includes the number of queries and applications submitted. BIK employees are of the opinion that this aspect only affects our credit rating in 5%.

It is hard not to give them words of faith, but on the other hand it is also true that we can not be completely sure about the bank’s decision to grant or refuse credit. The algorithm on the basis of which the score is calculated is classified information and no one except BIK has access to it.

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