5 things you need to know when applying for a consumer loan
- Request a pre-agreement information form
With the pre-agreement information form you will have a detailed insight into the contractual obligations before the final loan agreement is concluded. You will get a complete overview of the debt with all its constituent elements, you will better understand the whole calculation and you will see the total liabilities based on the loan, so that you can make a final decision about the future loan borrowing.
Key information contained in the pre-agreement information form:
– data and information on the loan product;
– conditions for using the loan;
– amount and currency in which the loan and the exchange rate are expressed, if applicable;
– type of collateral for the loan (if there is collateral);
– total cost rate (TCC);
– intercalary interest rate and other costs;
– total amount returned by the client,
– interest rate in case of late payment (penalty interest rate)
2. Request amortization plan simulation (loan repayment simulation)
In addition to the pre-agreement information form, you will receive a simulation on the amortization plan, i.e. a simulation for the future repayment of loan liabilities, which shows in detail the dynamics of repayment of installments, in which the principal and interest are given.
In this way, with these two documents you will have an insight into your obligations in advance and consequently you will plan the timely repayment, through proper planning of the spending of the future income.
3. Find out in detail about all loan costs
A special segment of the pre-contractual information is dedicated to the cost of the loan. This section lists:
– type and amount of interest rate to be applied (expressed in% on annual basis), as well as
– other costs that are paid for loan approval and arise from the loan agreement.
Type of interest rate, fixed or variable (variable)
You should pay special attention to the type of interest rate that will be applied. The interest rate can be fixed or variable. Fixed interest rate is a predetermined interest rate that does not change for the loan repayment period. Variable interest rate is an interest rate that can be changed at a higher or lower level. It is obtained as the sum of market index or reference rate and interest margin.
Intercalary interest rate
Additionally, clients need to know what an intercalary interest rate is. Intercalary interest is the interest that is calculated from the day of using the loan funds until the day of starting the loan repayment, at an interest rate equal to the interest rate of the loan. This rate is calculated from the moment of payment until the first payment of the loan. So, for example, if you take a loan on June 20, and you have to pay the first instalment on August 1, the first payment is on 1-st of July then the intercalary interest will be calculated until July 1. If the loan is taken with conditions for a grace period of 6 months, for the duration of the grace period, intercalary interest is calculated and paid in the amount of the interest rate of the loan.
Total Cost Rate (TCR)
The pre-agreement information form also contains information on the total cost of the loan, which means not only the interest, but also the additional costs of approving the loan, which are part of the total cost rate (TCR). TCR is a discount rate expressed on an annual basis as a ratio of total loan costs and total loan amount (expressed in two decimals).
If provided for in the consumer loan agreement, the following types of costs may be included in this rate:
– commission for processing a loan application;
– commission for loan approval and loan administration;
– commission for storage of the security instrument;
– commissions and fees related to mandatory additional services related to consumer loan, etc.
The calculation of TCR DOES NOT include
– non-fulfillment or delay in fulfilling the obligations from the consumer loan agreement;
– insurance or guarantee costs;
– notary fees;
– additional costs that are not known to the savings house, and it is still obliged to inform the client about the type of costs, without stating the amount.
4. When and how the fined interest is calculated
You need to know that if you do not pay your debts on time, you will fall into debt and in that case additional interest will be calculated for late payments. Penalty interest, or better known as default interest, is the interest payable in addition to the regular interest if you do not pay the principal on the due date, i.e. if you are late in meeting your debt-based obligations. The penalty interest is an obligation to compensate the damage that the debtor causes to the creditor by not settling the debt in the previously agreed and determined time of loan repayment.
5. Other rights
Additionally, as a consumer loan user you have the following rights:
– the right to cancel the consumer loan agreement, within a certain period;
– right to full or partial early repayment of the loan;
– if after the submitted loan application, the application is rejected due to the information received from databases, the savings house has to inform you immediately free of charge about that information and the manner in which it obtained the information;
– the right to a free copy of the draft consumer loan agreement.