Today we will discuss the main features of a non-purpose consumer loan. We will talk about the pitfalls of various products and how to detect them in time.
A non-purpose consumer loan is simply a loan. Whether you are borrowing new money or merging existing loans into one (consolidation), you are mainly interested in the following parameters:
- interest rate
- options and conditions for early repayment
- fees and resulting APRC
The average interest rate on consumer credit in August 2019 was 8.46% pa The abbreviation “pa” means “per annum” or annually. So if you borrow 100,000 USD with this interest rate, we can say for the sake of simplicity that your interest will be 8,460 USD for the first year. Interest paid over time is gradually reduced.
Sometimes the offer of interest rate is conditioned by negotiation of an additional product (insurance, account etc.). If you see a term like “Bonus interest rate” and similar terms somewhere, then be sharp. This is an interest rate that only applies under certain conditions. This is usually a condition where the loan will not be repaid early and no extraordinary repayment will be made.
In the Czech Republic, you can borrow money from a few days to several years. The longest maturity of a non-purpose loan may be a maximum of 10 years.
Possibility and conditions of early repayment
As of 1 December 2016, this is defined by law. The maximum early repayment fee may be 1% of the current loan balance (principal). It is worth noting that some banks offer this for free, ie without charge.
Fees and resulting APRC
The APRC stands for Annual Cost Percentage Rate. It is an expression of the interest rate after including all related fees. And here you have to be very careful. If the APRC and interest rates differ significantly (in the order of a few%), this means that you have additional charges hidden in the loan. It can be a negotiation fee, insurance price or other accompanying costs. The accompanying costs must be clearly quantified in the credit agreement. I have already seen APR 130.77% pa Such a client would not have a chance to repay. Always find this information in the loan agreement.
Will I get a loan?
Sometimes I see people think that for some reason the bank should not grant them credit. Very often this fear is unnecessary. If you are a working person and you have room in your monthly budget to repay the loan, it is very likely that you will find a bank that will grant you the loan. Therefore, do not take the first offer without prior competitive comparison.
If you are interested in this article, I will be happy to help you to compare offers on the market and also with the process of negotiating a loan, refinancing or consolidation. We may contact in any of the ways described below.