There are situations when we need to make a commitment to achieve an important goal. Then we usually decide to take a loan. How to start the application process and where to find the best conditions? We write about all this in the material below. We also advise on how a correct loan agreement should look like.
Who can get a loan?
Banks are very restrictive about their potential borrowers. Before we get a loan, we have to try very hard to convince the bank lender to grant us financing. Commitment is a challenge for us. Sooner or later each of us can come across this. It is worth preparing well and knowing what banks require from customers. First of all, you need to take care of your creditworthiness. Repayment of monthly obligations on time, timeliness of paying bills and not borrowing over the state is a signal for the bank that we are reliable potential borrowers. The bank will also examine our creditworthiness. Let’s make sure our credit history is clear and gives the feeling that we can be trustworthy and we will be able to repay the commitment. Lenders have many tools and mechanisms that they use to thoroughly check the clients to whom they will entrust funds in the form of credit.
What does the loan agreement look like?
The issue of the loan agreement is crucial because it indicates to us not only the parties who subscribe to it, but also the conditions that must be met for the contract to be concluded in a binding manner. Thus, the basic elements of the loan agreement are:
- Parties to the contract – lender and borrower
- Date of conclusion of the contract and place
- Amount of liability incurred
- Interest rate indication
- Fees constituting the cost of granting the loan
- Information on the time for which the contract is concluded and the amount of the monthly commitment that will be repaid by the borrower
- Information on how to withdraw or terminate the contract.
- All additional conditions that are necessary for proper loan activation (possible loan collateral).
- Attachments, which must be obligatorily attached to the contract.
How do I apply for a loan?
The application process and waiting for verification requires time and patience. If we are aware of this, it is easier to go through this period. Finally, we have at the back of our heads that we must collect all the documents and complete the formalities to achieve the goal – to obtain a loan. When we choose the place from which we want to obtain financing (bank or non-banking company), depending on the entity, the way to submit the application will be different. In the case of a bank loan, you must collect documents that the lender will indicate. There are many of them and some have to wait (e.g. a certificate of earnings from our employer). Having all the documents, we can complete and submit the application. Further, the bank will analyze this application and may possibly call for corrections or additions. After sufficient time and verification of our application, we will receive a credit decision whether the funds for which we have applied will be allocated to us. And in a company or institution outside of banking, there are no such formalities. Often, you only need some information and a statement on your monthly expenses and earnings to be able to apply for a loan in a simple form, usually even online. The verification process takes much less time and we actually receive feedback and access to various offers quickly.
What are the types of loans?
Depending on what we want to spend the loan or the time we want to commit, we can divide the loans, among others on:
- long, short and medium term
- mortgages to finance the purchase of real estate
- consumer loans, for various purposes – dedicated to individuals
- investment loans – intended for e.g. company development
- consolidation loans
- credit cards
It all depends on what goal we want to achieve, such a loan should be chosen. The task of a good credit advisor is to indicate the right products so that the client can achieve what he has set up.
The loan is a contractual relationship that connects the two parties to the contract – as we mentioned earlier. In order for this ratio to be considered as a financial product, it should be characterized by several attributes. In the first place it is characterized by maneuverability. The funds borrowed by us must be returned. The second important feature is timeliness. The money we have received for a specific purpose must be returned within the time period specified in the loan agreement. The last element that must appear in the construction of the loan is the interest rate. It is only when these three features come together that we can recognize that we are dealing with a loan.