Borrowing money is a good way to finance various purchases, as well as to quickly improve your financial situation. It is worth to learn more about solutions that allow you to get extra cash.
Taking out a loan is a chance to implement many plans. It can be a dream vacation trip, purchase of necessary household appliances or an apartment. If we have sufficient knowledge about the offers of banks and loan companies, we can make a fully informed decision regarding our finances. Credit and loan are words that are usually used interchangeably. Often, these concepts are understood very broadly, that is, as all situations in which we receive money from someone, which we then have to give back. It is worth knowing, however, that these terms also have more precise definitions used by financial institutions.
What is the loan about?
The loan is granted by financial institutions – banks and so-called credit unions. This is the amount that the borrower must pay back on the date specified in the contract together with the interest charged. The capital is made available to the borrower but does not become its property. The costs of granting such an obligation include interest and commission. The loan agreement must always be concluded in writing and in accordance with applicable law. The deadline for returning the borrowed sum is precisely defined.
A condition for receiving a loan is a positive verification of your creditworthiness. When examining the application, financial institutions primarily take into account the amount of income and expenses, as well as credit history and current debt. Creditworthiness means that the borrower will be able to pay the installments on a monthly basis. On its basis, the bank will also determine the maximum amount of the liability granted.
Loans – how do they differ from a loan?
The loan can be granted by any institution or a person who has financial resources at his disposal. This means that loans can be granted by banks, credit unions, private individuals and non-bank companies. The rules on which such transactions take place are set out in the provisions of the Civil Code. The transferred capital is the borrower’s property. The cost of the loan is usually a commission and interest, although it can be provided for free. It is not always necessary to write a contract.
Because virtually anyone can give a loan, there are many companies that do this. A non-bank loan is often an interesting alternative to a bank loan because it requires fewer formalities and is easier to get.
Loans from a bank or a loan company?
Banks grant loans for specific purposes, e.g. car and mortgage loans, but also loans that can be used in any way. An alternative solution is to incur such a commitment in a non-bank company. An online loan is a very tempting solution that is gaining more and more interest. The advantage of such an alternative is above all minimum formalities. Loan companies meet the needs of customers and allow you to complete the necessary formalities via the Internet, which significantly speeds up the entire process. For people who want to borrow a small amount, for example several hundred zlotys for unforeseen expenses, it simply does not pay to settle this at the bank.
A loan for ID is a very tempting proposition for many people. It cannot be denied that loan companies often place significantly lower requirements on their clients than banks that thoroughly check their creditworthiness. Therefore, non-bank loans are also available for indebted and unemployed people, you can make such an obligation with a bad credit history and negative entries in registers such as BIK. This type of solution is in many ways beneficial for people who are not in a good financial position.
Watch out for the debt spiral
You have to be aware of the fact that easy access to loans has many advantages, but it also has negative consequences. A loan for proof is easy to get, but like any other commitment, you must pay it back on time. When this is not possible, the spiral of debt is a real threat. In this situation, the borrower incurs further debts to pay off previous obligations. This, of course, is associated with a gradual increase in the cost of subsequent loans and deterioration of financial condition. Ultimately, the spiral of debt can lead to a total loss of liquidity and bankruptcy. Banks by checking customers thoroughly, impede access to loans, on the other hand, they limit excessive debt.
Cash loan and loan
A cash loan is a form of debt that is very similar to a loan. The borrower receives the amount specified in the contract, which he can then dispose of in any way. Of course, the sum must be paid back within a specified period, the interest and commission paid back. The cash loan usually does not require any collateral, the bank does not expect to specify the purpose for which the funds received by the client will be allocated. This means that thanks to such an injection of cash, you can simultaneously finance many different purchases, e.g. a holiday trip and the purchase of a new washing machine, and you don’t have to settle your expenses with the financial institution in any way. The rules for granting cash loans are therefore similar to loans, although they differ in formal and legal matters. The loan remains a much more flexible solution.
With a mortgage
Both loans and borrowings may have collateral in the form of a real estate mortgage, but it is worth remembering that these are completely different solutions. The mortgage is for people who do not own property and plan to buy it. In the case of such a commitment, the purpose of its incurrence must always be clearly defined and should be the purchase of a specific property. There is no such obligation in the case of a mortgage that can be used for any purpose, for example a foreign holiday or a new TV set. The condition for receiving such an obligation is, however, possession of real estate, which will constitute a security for the bank. The advantage of this solution is the favorable conditions on which it is granted. Because the bank has a guarantee that guarantees the recovery of borrowed money, it offers a lower interest rate than, for example, a cash loan.
For this reason, using real estate as collateral can be a very cost-effective solution for people who need an extra cash injection. However, one should take into account that the mortgage loan will be much lower than the loan, usually banks borrow a maximum of tens of thousands of zlotys. The receipt of such a loan will also involve additional formalities because the financial institution will require you to provide a number of documents related to the property, for example an excerpt from the land and mortgage register or a notarial deed. In addition, you will also need to document your income.
Over the Internet
More and more services, including financial ones, are available online. It is very convenient for customers, above all, it saves time and much more convenience. Nobody likes to spend free time waiting in line. In terms of availability, non-bank companies that offer payday loans online lead the way. In the case of such offers, customers can complete the application without leaving their home, and formalities are often kept to a minimum. Convenience often attracts customers who are even able to accept slightly higher loan costs in exchange for significantly simplified procedures.
Credit or loan?
The choice of one of these solutions depends primarily on the situation. Loans are much more flexible, we can find a much larger selection of such offers under various conditions. There are many loan companies on the market, such commitments are also granted by private individuals. There is no problem with getting the amount you need in a relatively short time. It is a solution that can be easily adapted to your needs and financial situation. Perfect for various random events, when you need to quickly fund your home budget with additional funds.
On the other hand, in some circumstances credit is the most favorable option. This applies mainly to very large amounts. For example, for the vast majority of people, virtually the only way to finance the purchase of a house or apartment is a mortgage, which is secured by a mortgage. Similarly when buying a car – although the new car will be owned by the bank, it is a security that allows you to reduce the cost of the loan.
As you can see there is no perfect solution. The choice of credit or loan form will depend on the specific situation, so you should orient yourself in the available solutions and make informed decisions about incurring such obligations.