It is very simple to get a bank loan today – consumer lending has long become the most popular financial product and each bank offers dozens of options. Therefore, now it is possible to apply for a loan without guarantors, certificates and checks, spending only a few minutes on the application process and waiting for approval.
Before taking on a loan, you should carefully and soberly assess your capabilities – after all, sooner or later the debt will have to be repaid with interest. In addition, you’d better spend a little time comparing loan offers in different banks since conditions can vary significantly.
Determining the purpose of the loan
Before applying for a loan from a bank, it is important to determine which type of loan suits you best. All lending products can be divided into two categories – targeted and non-targeted. Targeted funds include borrowed funds aimed at purchasing a specific product or service. Most often they are taken for large purchases – a car or an apartment, or for events that require significant expenses – such as training or repairs. Banks take this into account and offer customers targeted loans, which are issued for strictly defined purchases. Such borrowed funds are much “cheaper”, however, the credit institution closely monitors that the money issued was actually spent for its intended purpose. Therefore, the borrower will have to collect a lot of documents in order to prove the intended use of funds. For example, if we are talking about a loan for repairs, you will need to use the services of a construction company and provide all invoices and estimates. In addition, the bank sets special conditions to protect itself from the risk of non-payment. So, when issuing a loan for the purchase of a car, the bank obliges the client to sign an insurance agreement, and in case of mortgage lending, the loan agreement indicates that the housing being purchased is collateral for the loan. In most cases, the money is not transferred to the client but directly to the seller of goods and services – a car dealership, a repair company or an educational institution, if a loan is issued for education.
If you receive a non-targeted loan, no one will ask how you intend to spend the funds received. However, you have to pay for convenience – non-targeted loans are more expensive since the rates are higher, and the procedure for bank verification of the client will be more thorough. In addition, in these cases, there are restrictions on the amount of the loan.
Things to pay attention to when applying for a simple loan
So, you have chosen a suitable loan product and are ready to conclude an agreement. But before you put your signature, you should carefully study all the conditions and clarify some issues.
- Monthly payments. Do not hesitate to ask the manager what exactly is the total cost of the loan (taking into account the “body” of the loan, interest and all commissions), what is the repayment schedule and the amount of the required monthly payment;
- The cost of services related to the loan. Some banks charge a fee for reviewing a loan application, maintaining a credit account and issuing cash or conducting a non-cash transfer;
- Currency. To avoid conversion losses, you should open an account in the currency in which you receive your salary;
- Loan repayment. Be sure to find out if there are penalties for partial or full early repayment of the loan, as well as where and in what ways you can pay off the debt. The wider the list of options, the better for you;
- Insurance. Some banks automatically include life and health insurance of the borrower in the loan agreement. According to the legislation, no one can oblige a person to insure his or her life. Therefore, you can tell the manager that you do not need insurance, if this, of course, is the case;
- Late payment interest. Find out in advance how much it will cost you the fact of delay on the loan and every day, what are the conditions and the period of delay in payment, after which the bank has the right to demand early repayment of the loan.
In the struggle for customers, banks are trying to make service as convenient as possible. Today, you can apply for a loan in a variety of ways. The traditional way is to get a loan from a bank at the nearest branch. There it will be possible to personally talk with the manager and ask all the available questions, but the inconveniences are obvious – the client depends on the bank’s opening hours, there may be a queue at the branch, and the location of the office is not always convenient.
Another option is to apply online. Today many banks offer this service, especially for simple express loans. This method is very convenient – you can apply to several banks at once: at least one will certainly give a positive answer. There is no need to go anywhere, wait in a queue and waste time – everything can be done online.
Finally, you can apply for a simple loan from bank representatives working outside the branch – counters of different banks and credit organizations can be found in airports and shopping centers, and in some banks, a representative can visit your home or place of work.
Why can I get a loan refusal?
Despite the fact that it is not difficult to get a simple loan today, refusals still happen. The most common reasons are:
- Low salary and inability to confirm additional income;
- Inaccurate information about the borrower – banks really check the provided data, and a lie reduces the chances of getting a loan to zero;
- Bad credit, large utility bills;
- Bad relationship with the law – frequent offenses, convictions;
- Errors in paperwork;
- And finally, banks do not like the complete absence of any credit history: if we are talking about a large amount, it is better to “practice” on small loans and pay them accurately before applying for a simple loan online – then the chances of a positive decision will increase. The more information the borrower provides to the bank, the lower the probability of rejection, and all data must be accurate.