Personal Loans. All your questions answered.
What is a Personal Loan?
A personal loan is a financial product that lets you borrow an amount of money over a fixed term, usually at a fixed rate of interest. Most banks offer personal loans up to 100,000€. Repayments are usually spread over a period of between 1 and 10 years, depending on your personal finances (ie. your earnings and your regular monthly expenses)
What makes a good personal loan?
A good personal loan is one with low interest rates and an affordable monthly repayment, which will depend mainly on your financial situation. A fixed interest rate loan could be a good choice as your monthly payments will remain the same throughout the term of the loan. If you think you’ll want to repay the loan early, look for a loan that does not involve penalty charges as a result of an early cancellation.
Is a personal loan better than using a credit card?
A personal loan can be a cheaper way to borrow money than a credit card, if you are looking to borrow a considerable amount of money. You may also be able to borrow more at a lower Annual Percentage Rate (APR), “TAE” in Spain, than you would be able to on a credit card. Personal loans can let you borrow up to 100,000€, while credit cards normally offer less than 5,000€, so if the amount that you need is more than this, a loan may be the better choice.
What types of loans are there?
Loans can be divided into two categories: secured and unsecured. With a secured loan, the lender will require some kind of security against the amount that you borrow, often a house or car. If you default on the payments, the bank can then sell the asset to clear the debt. You can usually borrow large amounts with a secured loan, and at a lower rate of interest. Furthermore, you can pay back the debt over a long time period. However, secured loans are more risky than unsecured loans because you could lose your collateral if you cannot pay the debt. You should therefore think very carefully before taking out a secured loan.
Interest Rates in Loans
Interest rates on personal loans vary across the market, but the rule is that the more you borrow, the lower the rate. For example, you might pay interest of 9% on a 5,000€ loan, but only 4% on a loan of 10,000€. It can therefore make sense to borrow a bigger amount, for instance 7,000€ instead of 6,500€. Just make sure you do not take on a debt that you cannot afford to repay.
Interest Rates in Spain
This is the price of the money the bank lends, the amount charged by the bank for lending an amount of money and running the risk of default. It is represented as a percentage which is referred to as the APR (TAE in Spain) and NIR (TIN in Spain). Let’s take a quick look at these two concepts:
– TIN (Tasa de Interes Nominal) NIR refers to the Nominal Interest Rate, the price that the bank charges for lending us money. It is calculated on the basis of a percentage on the capital lent to the customer. This percentage is applied to the capital outstanding at any given time. The NIR does not include any fees the loan might have.
– TAE (Tasa Anual Equivalente), AER is the equivalent Annual Percentage Rate and, just like the NIR, represents what the loan costs, but this time including the fees and other expenses that can be associated with the granting of the loan.
Therefore, when analyzing the interest rate of the loan and comparing between one bank and another, the TAE (AER) is the figure you should pay attention to.
What means "TIN" in Spanish loans?
The acronym TIN (Tasa de Interes Nominal), called NIR in English, refers to the Nominal Interest Rate, the price that the bank charges for lending us money. It is calculated on the basis of a percentage on the capital lent to the customer. This percentage is applied to the capital outstanding at any given time. The NIR does not include any fees the loan might have.
Which means "TAE" in Spanish loans?
The “TAE” (Tasa Anual Equivalente”), APR in English, is the equivalent Annual Percentage Rate and, just like the NIR, represents what the loan costs, but this time including the fees and other expenses that can be associated with the loan. As we mentioned before, when analyzing the interest rate of the loan and comparing between one bank and another, the APR is the figure you should pay attention to.
What should I watch out for?
One of the most important factors when applying for a loan is the period of time over which you are going to repay it (repayment period). Be careful when choosing the period over which you want to repay the loan because although a longer repayment period will make the monthly installments smaller, in the long term it will also mean that you pay more in interests. A shorter repayment period, on the contrary, will increase the amount of your monthly installments but it will make your loan cheaper.
The most common fees in Spanish loans
Besides any interest you pay on your loan, most financing products offered by banks have some associated fees. The most typical fees on Spanish loans are the following:
– Arrangement Fee / Start-up fee: this is a small percentage of the total of the loan that is paid at the start.
– Assessment Fee: it refers to the cost that some banks apply for evaluating your application.
– Early Cancellation Penalty / Fee for early partial or full repayment: this consists of a percentage of the capital outstanding at the time the loan is cancelled.
What is the ASNEF and how does it influence a loan?
The Spanish acronym ASNEF stands for the National Association of Financial Credit Institutions. This is one of the largest registers of debt defaults in Spain. Appearing on this list will therefore make it very difficult to convince a bank to trust you with the granting of a loan, credit facility, mortgage, etc. In fact, it will make it almost impossible to gain access to financing. Now we will explain how this file works and discuss some alternatives for getting yourself removed from it.
The ASNEF is a database that is regularly consulted by banks as part of their research into a customer’s profile before deciding whether to lend money, offer a credit card, etc. Although it is not the only file of this type – the Unpaid Receivables Register (RAI in Spanish) is another – it is one of the most relevant and it is used as a decision-making tool by most banks in Spain.
Required documentation and other requirements when applying for a loan in Spain
Depending on the bank where the loan is being requested, there may be a greater or lesser number of documents required. It is most typical for a loan applicant to be required by the bank to provide his or her Tax ID Number (NIF) or Foreigner ID Number (NIE), the checking account number where the money loaned will be deposited, a photocopy of multiple salary receipts or evidence of other regular income being received, an employment history so the bank can have an idea about the borrower’s relationships with employers, the most recent income tax return, photocopies of deeds and titles for real estate and other assets possessed, and information related to any other loans that may exist.
In addition to all of this documentation, if the loan applicant is self-employed the bank may also request a photocopy of the self-employment registration document, the most recent annual VAT statement, and the most recent quarterly Income Tax payment slips.
What is an Instant Loan?
Instant loans are “quick” loans that come quite handy when we need money urgently. To respond to these urgent situations, there are now several instant loans available that can be taken out more or less immediately. Instant loans are taken out online via the websites of different banks or credit institutions specialized in this type of financing. There is a wide variety of instant loans available online. Therefore, a good first step is to compare their conditions, requirements and fees.
How much money can I get with an Instant Loan and what is required?
The amount of money offered varies a lot between instant loans. There are mini loans that offer €50 to €1,000 or €2,000, and higher loans of €5,000, €10,000 or €20,000. Furthermore, the repayment period depends on the bank/company that grants the loan and the loan amount: mini loans tend to have a repayment terms of no more than a few months, while the repayment periods for regular loans with amounts ranging into the thousands of euros tend to be measured in years.
On the other hand, as with any request to borrow money, your credit limit is largely determined by your economic situation. As you might expect, the larger the amount of the loan, the more requirements you will have to meet in order to qualify, although instant loans tend to have very few required conditions. For some instant loans, you would need to submit a paycheck or proof of income. However, with mini credits, you don’t even have to provide a proof of income.
In fact, some quick loans available via the Internet will even extend credit to people appearing on default lists, such as the ASNEF list.
To process the loan, you will be required to submit the following information:
– National ID Document or Tax ID Number (DNI or NIF in Spanish).
– Mobile phone number.
– Number of the account that will receive the money transfer.
– Document showing proof of income or salary.
Fees & prices in Instant Loans?
Mini-loans charge interest on a daily basis, usually at a higher rate than loans for larger amounts, although larger loans tend to demand more requirements or guarantees from customers. The customer can also select the time period for paying back the loan, although always within some minimum and maximum limits (typically 30 days or less).
With instant loans granted for larger amounts, the interest charged varies enormously from bank to bank, so in this case it is recommended that you should compare a variety of different offers before committing to one. Furthermore, you must remember that additional fees tend to come into play with loans for higher amounts, which may include:
– Opening fee: this is a percentage of the total amount of money requested.
– Early repayment fee: with loans for larger amounts of money, a fee is charged for early repayment of the loan.
– Penalty interest: if the money is not being paid back within the stipulated time periods, the lender may begin to add penalty interest and surcharges.
How long does it take to get an Instant Loan?
Typically loans of this type are approved within a few hours after being applied for, since there is hardly any ‘paperwork’ required and there are very few requirements in order to qualify. In any case, if you are thinking about applying for one of these financing products, it is always a good idea to compare a variety of offers, and above all to be very clear about the terms and conditions for repayment and the final cost of the loan.
What if I miss payments of my loan?
Missing repayments can mean you might be fined by your lender, and it could also end any low or zero interest incentives you have. It may even lead to a higher interest rate in your loan.
Can I pay off early?
You will normally be able to pay off the total remaining sum (or part of it) early, though some lenders may have an early payment charge.
Are you ready to compare loans?
With us, you can compare and apply for a variety of certified loans easily. So take a look at all the details provided to ensure you are getting the right one for your particular needs.
TIP: Work out how much you can afford to borrow and pay back before applying for a loan. This way you can look for loans in your borrowing range.
TIP: Secured loans are more risky than unsecured loans. You could lose your collateral if you can not pay the debt. You should think very carefully before taking out a secured loan.
With us, you can compare and apply for a variaty of certified loans easily. So take a look at all the details provided to ensure you are getting the right one for your particular needs.