How to Take Non-bank Loans? Basic Dates and Things to Watch Out for

It can happen to everyone. One unexpected, unfortunate event and we start to accumulate debts. Be it for rent, for telephone operators or even at the bank. One does not even know how and already has a negative record in the register of debtors and is waiting for the worst.

Although the reputation of non-banking companies is not one of the best, they can be a good and useful helper in difficult life situations. However, they must be approached with caution and sufficient knowledge.

At this moment, every tenth person over fifteen is under distraint and there are more cases like this. Many unfortunate situations are due to mere inattention.

Non-banking companies are far behind the telephone operators and transport companies in the frequency of clients sent to execution, but they cannot be ignored. The most common reason why a person drawing a non-bank loan gets into execution is because of inattention and often ignorance.

Online loans – basic terms

Online loans - basic terms

You know how interest differs from APR. And what does pa or pm mean? Before you get involved in signing a non-bank loan contract, you should know these terms very well. This is the only way to get into a precarious situation and not have to pay much more than you originally thought. We have written a glossary of the most important terms for you in the following paragraphs.

Interest pa – interest per anual

Interest pa - interest per anual

Interest pa is an abbreviation of Latin per anual, which we can translate as “annually”. This term therefore indicates how much of the loan we will pay on the interest itself within one year. It is this data that is often misled when people interpret it as interest for the entire period of drawing the loan.

If we find an interest rate of 365% for a short-term payday loan that we want to draw for one month, there is no need to worry about overpaying that much. In fact, in the case of early repayment on interest we pay 30.4%. However, even this figure is not accurate to determine how much money we have to repay the loan. That’s up to APR

APR – annual percentage rate of charge

APR - annual percentage rate of charge

The APRC stands for the annual percentage rate of charge. This percentage, which all lending companies have been obliged to report since 2002, hides all the costs you pay for the loan. This means that, in addition to interest, administrative fees for contract processing and loan management, account maintenance costs and money transfer, insurance, etc. are included, so the APR indicates the exact percentage you will pay for the loan per year.

Most short-term online loans have APRs of thousands, and sometimes even millions of percent. At first glance, this figure looks frightening, but in fact the percentage is so high because you pay back the loan in a few days, and if companies offered similar APRCs to micro-loans as they did for hundreds of thousands of loans, they would fail very quickly.

Another reason for higher APRCs for non-bank loans is that they are largely drawn by risky clients and companies insure that they will continue to earn at a higher percentage of non-paying clients.

Banks verify their clients much more thoroughly and lend only to people for whom no repayment problems are anticipated, which is one reason why they can afford to offer significantly lower APRCs.

Creditworthiness – the ability of the customer to receive a loan

Creditworthiness - the ability of the customer to receive a loan

Creditworthiness – it is simply a term indicating the possibilities and willingness of a potential borrower to repay his loan. It is usually assessed on the basis of the applicant’s income and expenditure, but also taking into account existing records in both the banking and non-banking registers. In assessing creditworthiness, companies also take into account the applicant’s gender and age, marital status or occupation and education.

Creditworthiness is simply a summary and evaluation of all aspects that affect our total income and expenditure, stability, but also responsibility (for example, the higher education we have, the more likely we are to find new jobs quickly if we lose jobs) ability to achieve the goals).

Borrow safely

Borrow safely

Before applying for a non-bank loan, take a close look at its site and offer and ask yourself the following questions:

  • Do you have sufficient funds to repay?
  • Are you in danger of losing your income?
  • Is a loan really necessary for you?
  • Does the company have a transparent website?
  • Do you know the company name?
  • Does the APR loan calculator and the total amount you repay?
  • Did you find any reviews and opinions on this company on the Internet?
  • How much total will you pay for the loan?
  • Is its APR proportionate to the repayment period?
  • Does the company have written terms and conditions on its website?
  • What are the penalties for late payment or postponement of the due date?

If you hesitate with one of them, it is worth looking for another company or think about the loan completely. For example, if you need to borrow to pay off another loan, try solving your problem with the original lender first. If you hear from him in time, he will certainly accommodate you and allow you to postpone the repayment term, or spread the total debt and you will not unnecessarily get into an endless spiral of debt that never ends well.

Read the loan agreement!

Read the loan agreement!

We keep the most important advice at the end. Yes, we know very well how boring and annoying reading a contract can be, but if you skip this step, you may encounter a really unpleasant surprise.

It is tempting and simple to trust sales agents who promise you beautiful interest and favorable terms, but their words must always be backed up in the contract as well. We have already encountered countless stories of unfortunate debtors who only read the contract at the first problem and then wondered about the huge interest on late payments, or even the fact that something completely different from the phone was agreed in the contract.

Read the agreement. If you have already taken the loan and omitted this step, you have a fortnight to cancel it without penalties and stating the reason. Read it, and if you don’t see anything, never sign it and choose a different company.