Loans are divided into personal and finalized. While the latter are connected to the purchase of an asset (a house, a property, an appliance), and therefore are requested through the brokerage of the dealer, the real estate agent or the seller affiliated to a credit institution, the former allow to the customer to get a sum, regardless of the use to which it will be destined.
The personal loan, therefore, is based on the direct relationship between the applicant and the bank (or the company that provides loans), and therefore entails greater risks of insolvency, as there is no asset or property that acts as collateral or that can be resold or returned to repay the sum in question. This means that the conditions for obtaining a personal loan are a little more restrictive, the interest rate will be slightly increased and higher guarantees will be required.
What is a personal loan?
A personal loan, therefore, is a loan granted to the client, with a fixed interest rate and a repayment plan, organized in monthly installments, which can last from a few months to a decade. As we said before, it is requested directly by the customer, who goes to the selected bank or credit institution, without having to provide any explanation regarding the way in which it will be used.
As this is a far more risky transaction than banks, these banks may require greater guarantees, and carry out more detailed checks on the situation and financial standing of the client: those who in the past have been reported to the Central Credit, therefore, they could encounter a lot of difficulties.
The guarantees required
The guarantees required for a personal loan change according to the sum requested: for small loans it is sufficient to show that you receive an income or a pension, while for larger amounts you may need contracts with tighter bonds, and of course your paycheck.
In some cases, for example, banks require that you sign a contract that determines the rate of cambializzazione (or the resolution of the entire amount in a single bill of exchange) in order to mitigate the risks, but the most frequently requested guarantees it is the involvement of a third person, called guarantor, who assumes the risk of the operation: it is up to the latter, in fact, to pay the sum necessary to cover the expenses that have remained unpaid, if the applicant can not do it for himself.
The guarantor is indispensable above all when the client is elderly, does not have a fixed or sufficiently high income, has a minimum working age, or when the sum in question is particularly high: this figure, generally, is covered by a parent, a relative or a friend.
In other cases, on the other hand, an insurance policy must be signed, the cost of which is added to the loan: this occurs mainly when the client is old, and therefore at risk of death, or when the probability of losing the job (and therefore income) are high. Therefore, it will be up to the insurance company to cover the costs if the applicant should fail before he has paid off his debt, while if he is fired, he will have to repay the amount paid by the company as soon as he finds another job.
However, each credit institution requires special guarantees, based on its own assessments of the transaction: it is therefore impossible to assess a priori whether the loan will be granted or not, as a number of factors come into play, often also linked to variable circumstances.
The contract signed by the client and the bank puts the conditions concerning the loan in writing, and must therefore be signed by both parties, as well as contain the following elements, so that it can be considered valid:
- Type, method and figure obtained with the loan
- Information on the installment plan (number of installments, deadline…)
- TAEG (Annual Effective Annual Rate)
- Interest rate and general costs
- Guarantees required
- Consequences in the event of insolvency
What is the APR?
The APR is the Global Effective Annual Rate, and includes both the cost of the loan (sum disbursed plus interest) and the ancillary costs. Unlike the TAN (Annual Nominal Rate), which expresses, starting from the initial figure and the number of installments, the interest rate that is added to the sum obtained, the APR includes all expenses, therefore also those related to any coverage insurance, or charges borne by the customer.
Failure to pay an installment
As we said, on the contract it is also necessary to specify the consequences that the user must meet, in case of non-payment of one or more installments. They are rather unpleasant, as they involve the addition of a default, the inclusion of the name in the Central Risk – which causes great difficulty, if you would like to ask for further financing in the future – and, above all, the risk that the bank unilaterally resolves the contract: in the latter case, the customer will have to fully pay the costs, both those related to the loan, and all the ancillary charges, added to a penalty.
The customer can choose, if he deems it appropriate, to pay the full amount (or the amount not yet paid) in one solution: in this case, the bank can apply a penalty, which by law can not exceed the 1% of the total amount. This method, however, allows the user to ‘get rid of’ quickly a loan obtained under unfavorable conditions, requiring another more advantageous.
Personal loans for bad payers
Is it possible to obtain a personal loan if you have been included in the list of bad payers ? The answer is yes, even if the conditions will certainly be more restrictive, as the guarantees required could be greater: frequently, in fact, customers who have received a protest are required to have a guarantor or the signing of special insurance coverage.
However, the best way to obtain funding, for those who have been reported to the Central Risk, remains the assignment of the fifth, although this type excludes those categories of individuals who are not dependent on the state, who do not receive a pension or who perform the freelancer.
When NOT to apply for a loan
In a period like this, where the economic conditions of citizens are often precarious and fluctuating, it is good to be very cautious and reflect calmly, before signing any commitment. This is especially true for those who do not have a high income or a permanent job: at the least unexpected, they may find themselves unable to support the monthly installments, thus suffering the unfortunate consequences reserved for insolvent customers.
The same applies to those who have numerous ongoing installment plans: monthly expenses add up faster than expected, and the risk of seeing their income too low, unfortunately, is more than consistent. So, unless you have a relative ready to cover your shoulders, the best thing is to await the extinction of a debt, before contracting another!