When you need to make a large purchase, and there are not enough savings, a consumer loan can be a logical solution to the problem. We tell you where you can get it and how to draw up a contract so that over time it does not turn into a problem.
A consumer loan is money that you borrow from a bank to buy goods and services for yourself or your family. Consumer credit is issued only to individuals, it cannot be issued to a company.
In addition, there are consumer loans. They can be taken from microfinance organizations (MFOs), consumer credit cooperatives and pawnshops. In fact, this is the same as a loan, but the terms of the loan can be very different from the terms of the loan.
What are the types of consumer loans?
They can be divided according to several criteria:
1. By goal
A consumer loan can be taken both for a specific purchase — target, and without specifying the upcoming expenses. For example, if you apply for a POS loan at a furniture or electronics store, the bank transfers the money directly to the seller. This is a targeted loan. If you take out a loan or a loan and do not report what you spent it on, it is considered inappropriate. The rates for targeted loans may be lower, especially if it is an affiliate program of a store and a bank.
2. To ensure
When you take out a loan for a large amount, the bank usually needs additional guarantees that you will repay it. Collateral for a loan is often a pledge, such as a car or other property, or a guarantee from other persons. If the thing is pledged to the bank, you can continue to use it, but you cannot sell or give it away. In addition, the bank may ask her to insure. But the interest on secured loans is usually lower than on unsecured ones.
3. By terms
The division by terms of loans and loans is usually very different. For MFOs, a short—term loan is considered to be up to 30 days ("before salary"), and for banks, short-term loans are up to a year. The term greatly affects the interest on the loan and loan. Usually, the longer the term, the lower the rate. But not always — you need to study the conditions of a particular organization.
What do I need to do to get a loan?
Each bank, MFI or other organization sets its own rules. For example, to get a loan from a pawnshop, it is enough to show your passport and leave something valuable as collateral. For a consumer loan in an MFI, usually only a passport is also needed, it can even be issued online. And the bank, before giving you a loan, especially for a large amount, can set much more conditions. But there are several general requirements.
1. Provide documents
There are only two mandatory documents: a citizen's passport with a registration mark (or another identity document) and a loan application.
When applying for a POS loan, consultants often ask to show a second document with a photo, for example, a license. This is necessary so that fraudsters could not collect loans and loans on someone else's documents.
Banks may require a certificate of income or other documents confirming your financial viability. The full list of documents can be found on the lender's website or in his office.
2. Report your income.
Your salary, pension or scholarship is not always required to be documented, but you usually need to report income. The maximum loan amount depends on this. The higher your income, the more credit you will be able to pay.
If you have guarantors, you are ready to pledge property or insure in favor of the bank, then the amount of the loan or loan may be even more. After all, the bank risks less in this case.
3. Take out insurance
Often in credit agreements there is a clause that obliges you to insure the collateral, your life or health. By law, you are not required to do this, but insurance will reduce possible credit risks, for example, to keep the mortgaged property if you suddenly lose your job and will not be able to pay on the loan. With such insurance, the bank can offer you more favorable terms on the loan amount, term or interest rate.
If a bank offers a loan with simultaneous life and health insurance, then it is obliged to offer an alternative loan option without insurance, but on terms comparable in amount and repayment period. You can refuse to buy insurance, but then the terms of the loan will change.
How to choose a loan?
In order for a consumer loan or loan not to lead you into a debt pit, you need to carefully weigh everything.
1. Evaluate your capabilities
Calculate how much and for how long you need. But keep in mind that you will have to return not only this money, interest and possible additional payments will be added to them.
2. Find out how much you will have to pay.
Be sure to find out the full cost of the loan (PSK). It takes into account not only the interest rate, but also other expenses stipulated by the contract, such as compulsory insurance or a fee for issuing a credit card.
Check if any additional paid services that you do not need are included in your contract: credit card, SMS notification, voluntary life and health insurance, remote service or notary services. Specify whether these items are mandatory or you can opt out of them.
Please note that in the cost of the loan, the bank should not include services to which you did not give your consent, and those that it provides in its own interests: consideration of the application, preparation of documents for the contract, maintenance of the loan account.
3. Compare the terms of different creditors
Any bank, MFI, PDA or pawnshop has general terms of a consumer loan agreement — these are standard requirements for anyone who wants to take out a loan or loan. They can always be found on the organization's website or in its office.
But each contract has a set of individual conditions — they determine the cost of a loan or loan, the terms and amount of monthly payments, which includes interest.
Individual conditions consist of 16 mandatory items and may contain additional items. All of them must be agreed by the bank and the borrower.
All conditions should be specified in a special table at the beginning of the contract and should be clear to you. The contract itself can be considered concluded only if you and the bank have reached agreement on all points.
What conditions should you pay special attention to?
In addition to the main thing – the loan amount, term and interest rate – be sure to check the following points:
1. Payment schedule
Make sure that you will be able to give the bank the required amount on time. It is better to be safe: for example, if you have a salary on the 20th of each month, you should choose the date of depositing money no earlier than the 25th. After the conclusion of the contract, the bank is obliged to give you a payment schedule. For credit cards and overdraft cards, the exact schedule is not issued, but the contract prescribes the repayment terms of the debt.
2. Early repayment of debt
If desired, in addition to mandatory payments on schedule, you can make additional amounts – they will reduce your principal debt. Then the percentages will be less.
After each such early repayment, the lender will have to draw up a new schedule for you. Many contracts allow you to choose independently – to keep the same amount of payments and shorten the loan term or to reduce monthly contributions, and leave the term the same. It is more profitable to pay off the lender faster – then the final overpayment will be less.
Usually you need to warn the lender about your decision to repay the debt ahead of schedule at least 30 days in advance. But a shorter notice period may be set in the contract. Sometimes it is enough just to put a check mark in your personal account on the website or in the mobile application so that an additional amount is credited and a new schedule is given to you. Clarify this in advance. Read more about the procedure for early repayment here.
3. Fines and penalties
Specify what will happen if you fail to comply with the payment schedule. If you know in advance that even the day of delay will cost a certain amount, then you may be more closely monitoring the dates in the calendar.
4. Processing of personal data
There may be a clause in the contract stating that you allow the use of your personal data. Specify exactly how they will be used. If in order to send you promotional mailings, then you can opt out.
5. Assignment of rights
Usually there is a clause in the contract stating that the lender has the right to transfer your debt to third parties. For example, if you are overdue payments or if the organization itself decides to close. You can prohibit the assignment of rights, but there is a chance that then you will increase the rate or even refuse a loan.
Don't rush to sign the contract right away. According to the rules, you can take 5 days to think about the offer. At this time, the bank cannot change the individual terms of the contract offered to you. And you can compare the offers of different lenders and choose the one that suits you.
A consumer loan is money that you borrow from a bank to buy goods and services for yourself or your family. Consumer credit is issued only to individuals, it cannot be issued to a company.
In addition, there are consumer loans. They can be taken from microfinance organizations (MFOs), consumer credit cooperatives and pawnshops. In fact, this is the same as a loan, but the terms of the loan can be very different from the terms of the loan.
They can be divided according to several criteria:
1. By goal
A consumer loan can be taken both for a specific purchase — target, and without specifying the upcoming expenses. For example, if you apply for a POS loan at a furniture or electronics store, the bank transfers the money directly to the seller. This is a targeted loan. If you take out a loan or a loan and do not report what you spent it on, it is considered inappropriate. The rates for targeted loans may be lower, especially if it is an affiliate program of a store and a bank.
2. To ensure
When you take out a loan for a large amount, the bank usually needs additional guarantees that you will repay it. Collateral for a loan is often a pledge, such as a car or other property, or a guarantee from other persons. If the thing is pledged to the bank, you can continue to use it, but you cannot sell or give it away. In addition, the bank may ask her to insure. But the interest on secured loans is usually lower than on unsecured ones.
3. By terms
The division by terms of loans and loans is usually very different. For MFOs, a short—term loan is considered to be up to 30 days ("before salary"), and for banks, short-term loans are up to a year. The term greatly affects the interest on the loan and loan. Usually, the longer the term, the lower the rate. But not always — you need to study the conditions of a particular organization.
What do I need to do to get a loan?
Each bank, MFI or other organization sets its own rules. For example, to get a loan from a pawnshop, it is enough to show your passport and leave something valuable as collateral. For a consumer loan in an MFI, usually only a passport is also needed, it can even be issued online. And the bank, before giving you a loan, especially for a large amount, can set much more conditions. But there are several general requirements.
1. Provide documents
There are only two mandatory documents: a citizen's passport with a registration mark (or another identity document) and a loan application.
When applying for a POS loan, consultants often ask to show a second document with a photo, for example, a license. This is necessary so that fraudsters could not collect loans and loans on someone else's documents.
Banks may require a certificate of income or other documents confirming your financial viability. The full list of documents can be found on the lender's website or in his office.
2. Report your income.
Your salary, pension or scholarship is not always required to be documented, but you usually need to report income. The maximum loan amount depends on this. The higher your income, the more credit you will be able to pay.
If you have guarantors, you are ready to pledge property or insure in favor of the bank, then the amount of the loan or loan may be even more. After all, the bank risks less in this case.
3. Take out insurance
Often in credit agreements there is a clause that obliges you to insure the collateral, your life or health. By law, you are not required to do this, but insurance will reduce possible credit risks, for example, to keep the mortgaged property if you suddenly lose your job and will not be able to pay on the loan. With such insurance, the bank can offer you more favorable terms on the loan amount, term or interest rate.
If a bank offers a loan with simultaneous life and health insurance, then it is obliged to offer an alternative loan option without insurance, but on terms comparable in amount and repayment period. You can refuse to buy insurance, but then the terms of the loan will change.
How to choose a loan?
In order for a consumer loan or loan not to lead you into a debt pit, you need to carefully weigh everything.
1. Evaluate your capabilities
Calculate how much and for how long you need. But keep in mind that you will have to return not only this money, interest and possible additional payments will be added to them.
2. Find out how much you will have to pay.
Be sure to find out the full cost of the loan (PSK). It takes into account not only the interest rate, but also other expenses stipulated by the contract, such as compulsory insurance or a fee for issuing a credit card.
Check if any additional paid services that you do not need are included in your contract: credit card, SMS notification, voluntary life and health insurance, remote service or notary services. Specify whether these items are mandatory or you can opt out of them.
Please note that in the cost of the loan, the bank should not include services to which you did not give your consent, and those that it provides in its own interests: consideration of the application, preparation of documents for the contract, maintenance of the loan account.
3. Compare the terms of different creditors
Any bank, MFI, PDA or pawnshop has general terms of a consumer loan agreement — these are standard requirements for anyone who wants to take out a loan or loan. They can always be found on the organization's website or in its office.
But each contract has a set of individual conditions — they determine the cost of a loan or loan, the terms and amount of monthly payments, which includes interest.
Individual conditions consist of 16 mandatory items and may contain additional items. All of them must be agreed by the bank and the borrower.
All conditions should be specified in a special table at the beginning of the contract and should be clear to you. The contract itself can be considered concluded only if you and the bank have reached agreement on all points.
What conditions should you pay special attention to?
In addition to the main thing – the loan amount, term and interest rate – be sure to check the following points:
1. Payment schedule
Make sure that you will be able to give the bank the required amount on time. It is better to be safe: for example, if you have a salary on the 20th of each month, you should choose the date of depositing money no earlier than the 25th. After the conclusion of the contract, the bank is obliged to give you a payment schedule. For credit cards and overdraft cards, the exact schedule is not issued, but the contract prescribes the repayment terms of the debt.
2. Early repayment of debt
If desired, in addition to mandatory payments on schedule, you can make additional amounts – they will reduce your principal debt. Then the percentages will be less.
After each such early repayment, the lender will have to draw up a new schedule for you. Many contracts allow you to choose independently – to keep the same amount of payments and shorten the loan term or to reduce monthly contributions, and leave the term the same. It is more profitable to pay off the lender faster – then the final overpayment will be less.
Usually you need to warn the lender about your decision to repay the debt ahead of schedule at least 30 days in advance. But a shorter notice period may be set in the contract. Sometimes it is enough just to put a check mark in your personal account on the website or in the mobile application so that an additional amount is credited and a new schedule is given to you. Clarify this in advance. Read more about the procedure for early repayment here.
3. Fines and penalties
Specify what will happen if you fail to comply with the payment schedule. If you know in advance that even the day of delay will cost a certain amount, then you may be more closely monitoring the dates in the calendar.
4. Processing of personal data
There may be a clause in the contract stating that you allow the use of your personal data. Specify exactly how they will be used. If in order to send you promotional mailings, then you can opt out.
5. Assignment of rights
Usually there is a clause in the contract stating that the lender has the right to transfer your debt to third parties. For example, if you are overdue payments or if the organization itself decides to close. You can prohibit the assignment of rights, but there is a chance that then you will increase the rate or even refuse a loan.
Don't rush to sign the contract right away. According to the rules, you can take 5 days to think about the offer. At this time, the bank cannot change the individual terms of the contract offered to you. And you can compare the offers of different lenders and choose the one that suits you.
What should I do if I have difficulties with payments?
When for some reason you cannot pay the debt, it is better to immediately inform the lender about it. Consider options for restructuring or refinancing the loan.
If you have a mortgage, find out if you can qualify for a mortgage vacation.
Borrowers who have become participants in a special military operation, as well as their loved ones, can count on credit holidays for any loans and loans in connection with the mobilization. Provided that the loan agreement was concluded before the draft.
Remember that in some situations, the bank has the right to demand early repayment of the loan:
When I repay the debt, will the bank automatically close the credit account?
No. As a rule, for loan settlements, the bank opens a separate account for the borrower and is not obliged to close it when the person fully repays the debt. After all, there is a possibility that a person will continue to want to use it.
For example, banks often link a regular debit card to this checking account. It is convenient to make loan payments with it. And after you pay off the debt, you can keep the card for yourself for some other purposes. For example, to use it exclusively for payments in online stores - to replenish exactly the amount of the payment immediately before the order. Even if, after a hacker attack, the card data of online store buyers gets to the scammers, they will not be able to steal money from you. Using a separate card for Internet transactions is much safer than paying with a salary card or a credit card with a large limit.
But be careful: often the service of such a card and account is free only when you pay off the debt. And after that, the bank can charge commissions. Therefore, specify the rates in advance.
If you no longer need either the account or the card attached to it, submit an application to the bank to close the account and cancel the card. Otherwise, there is a risk that due to the write-off of some commissions, you will have a new debt.
When for some reason you cannot pay the debt, it is better to immediately inform the lender about it. Consider options for restructuring or refinancing the loan.
If you have a mortgage, find out if you can qualify for a mortgage vacation.
Borrowers who have become participants in a special military operation, as well as their loved ones, can count on credit holidays for any loans and loans in connection with the mobilization. Provided that the loan agreement was concluded before the draft.
Remember that in some situations, the bank has the right to demand early repayment of the loan:
- if you have been constantly violating the terms of the contract for six months: for example, you paid the loan with delays of more than 60 days or did not deposit the entire monthly amount;
- if you took out a targeted loan, but spent the money for purposes that were not specified in the contract (for example, you took out a loan to buy household appliances, but handed it back to the store, and spent the money on vacation);
- if under the contract you had to insure the liability for the loan or the collateral, but did not do so within 30 days.
When I repay the debt, will the bank automatically close the credit account?
No. As a rule, for loan settlements, the bank opens a separate account for the borrower and is not obliged to close it when the person fully repays the debt. After all, there is a possibility that a person will continue to want to use it.
For example, banks often link a regular debit card to this checking account. It is convenient to make loan payments with it. And after you pay off the debt, you can keep the card for yourself for some other purposes. For example, to use it exclusively for payments in online stores - to replenish exactly the amount of the payment immediately before the order. Even if, after a hacker attack, the card data of online store buyers gets to the scammers, they will not be able to steal money from you. Using a separate card for Internet transactions is much safer than paying with a salary card or a credit card with a large limit.
But be careful: often the service of such a card and account is free only when you pay off the debt. And after that, the bank can charge commissions. Therefore, specify the rates in advance.
If you no longer need either the account or the card attached to it, submit an application to the bank to close the account and cancel the card. Otherwise, there is a risk that due to the write-off of some commissions, you will have a new debt.