Personal Loans. All your questions answered.

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.

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.

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 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.

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.

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.

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.

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.

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.

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.

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. 

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.