Money for any purpose, without additional security and with a decision in one or several days? That’s how you can characterize a cash loan. The lower amount (up to PLN 150,000) and the shorter repayment period (up to 10 years) mean that banks are less rigorous about providing such financing.
Demand is growing, and this unfortunately causes many offers to appear on the market. Effect? By borrowing PLN 20,000 for four years, you can donate less than PLN 23,900 or over PLN 27,000. You will admit that a difference of over PLN 3,000 in costs is a lot. So what to do to choose the best? Look carefully at the cost of the loan.
What costs are associated with taking a cash loan?
Have you seen a spot advertising a zero-interest loan on your monitor or TV screen? Remember that this does not mean that you will give back as much as you borrow. The total cost of credit is not only affected by interest. Below are the basic parameters that affect the total cost of the loan:
Loan interest rate
It’s a salary to the bank for lending you money. The interest rate may be fixed or variable – however, in the case of cash loans due to the relatively short repayment period and the low amount of the liability, banks usually provide a fixed interest rate guarantee.
Its value is expressed as a percentage and on an annual basis. It decides on the amount of interest to be paid on a monthly installment. However, it cannot be higher than four times the NBP lombard rate – this is regulated by the Civil Code.
Commission for granting a loan
This is a one-time fee charged by the bank for granting the loan. Its amount is usually expressed as a percentage, although there are offers in which the amount appears. The commission can be collected after the loan is released, more precisely when it is disbursed, or added to the loan amount and repaid in a monthly installment.
When the commission is charged once, it is very important whether interest is calculated on the loan amount and commission or only on the loan amount. If the bank calculates the installment first and then collects the commission, you will have more to pay back.
Unfortunately, the amount of commission is not regulated by the code. And due to the fact that banks cannot raise interest rates too much – because they are limited by the Consumer Credit Act, they cannot charge additional fees for insurance, in which the bank is the insurer – due to the recommendation of U. The only possibility of additional earnings is imposing higher commission. Until 2011, its maximum could not exceed 5 percent, but these restrictions were lifted.
Some banks require insurance to provide financing or, in exchange for buying it, guarantee a lower interest rate or commission. However, you must carefully check such offers. Why? First of all, it often turns out that the insurance that was supposed to protect you, i.e. help pay the installment in case of sudden financial problems, has many exclusions that limit the scope of such support. Secondly, often the costs of such insurance are much higher than the profit resulting from the reduction of commission or interest rate. And this ultimately means higher total loan costs.
Some banks, for example, charge a preparation fee. It is worth looking for offers without such costs to save up to several hundred zlotys.
Costs of additional products in the case of offers with cross-selling
Here, as in the case of insurance, some banks in exchange for signing a contract for an additional product, usually a personal account or credit card, offer a lower interest rate or commission. They don’t do it in good faith to offer you a better product, e.g. a free account, because they know that for what you have, the bank charges a fee just to sell as much as possible.
Of course, it may turn out that the product offered will be good for you. However, if you do not need it or it is not favorable for you, then just give up such a loan.