Loans are very popular, especially cash loans and mortgages. However, it still happens that we have problems distinguishing between different types of credits, we confuse nominal interest rates with real interest rates or consumer credit with consumer credit. See what you need to know before you decide to borrow money.
Consumer credit and consumer credit
These two names sound similar and are often used interchangeably. Meanwhile, they have quite different meanings, so it is worth putting your knowledge in order.
Consumer credit is defined as all credits intended for natural persons not conducting business activity. Consumer credit is therefore the majority of loans, and we can include loans for any purpose, as well as car loans and mortgages. It is worth adding that a person running a small business can also receive such a credit. However, it cannot use the funds from consumer credit to run a business. It is also important to remember about proper accounting.
Consumer credit is a type of cash loan. It is distinguished by the fact that it is designed for any purpose. The bank does not specify in any way what you are to spend the money you receive on, and you do not have to account for it in any way.
Cash credit and consumer credit
So how does cash credit compare to consumer credit? Can't you always use your cash loan money for any purpose?
There are types of cash loans which specify exactly what the funds obtained by the borrower are to be spent on. A great example is the popular car loan.
Another example of a cash loan for a specific purpose is an instalment loan. In this case, you buy e.g. electronic equipment in the shop and pay it back in several instalments.
Conditions for obtaining a mortgage
Many doubts are often raised by the conditions that must be met in order to obtain a mortgage, i.e. secured by a mortgage established for the bank.
First of all, remember your own contribution. Currently, the recommended own contribution is 20%. Some banks accept a smaller own contribution (the minimum is 10%), but this usually involves additional fees. Please note that you don't have to have your own contribution in cash. The amount includes, among others, the advance payment made to the developer, the cost of the purchase of building materials or the purchase of a plot of land for the property. Remember to compare several different mortgages to check the total cost of the loan and the required conditions - check your mortgage in totalmoney, a professional financial comparison engine.
It is also worth dispelling doubts about the age of the borrower. In the case of a mortgage loan, it is assumed that it should not exceed 70 years at the time of repayment. This does not mean that an elderly person will not take out such a loan - however, they have to take into account higher costs, e.g. they have to pay additional insurance.
Nominal or actual interest rate?
Finally, it is worth recalling the basic issue: what counts is the actual interest rate, not the nominal rate - when comparing offers, look at the RRSO, i.e. the Annual Percentage Rate of Interest. This includes not only the cost of interest but also all additional charges.