We are surrounded by numerous offers, leaflets and advertisements for loans on the market. As most of the information that is required to be included in the credit line calculation is very complex, only the most important credit information – interest rate, repayment period and EIR – are usually included in the “foreground”. Due to the visually prominent information, what is written in small letters often misses us, so the comparison of credits is not easy at all.
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From a large number of credit lines, choosing the best one and understanding all the information on the terms and procedure of lending is a big problem for citizens with insufficient financial knowledge.
It is precisely the understanding of all the conditions, factors and parameters that is crucial in order for the credit offers to be well considered, analyzed with understanding and reasonably classified. Only a detailed analysis leads to a quality comparison, and ultimately a quality selection of the credit offer.
Therefore, going to credit intermediaries who have all the credit line information is key to making the right choice.
Advertising vs reality
For example, many motorhomes have recently been advertised to offer financing for the purchase of vehicles at 0% interest. Buy a new car, pay it in monthly annuities, without interest. Sounds great and very attractive. Who wouldn’t decide to find out more about this kind of vehicle financing. When they came to the car dealership, they would get the information that there is indeed an option to buy the vehicle at 0% interest but … The repayment lasts only 12 months and is divided into two repayment installments: half pay immediately, half pay at the end or 1/3 pay immediately, and the rest in two more installments over the next two years. The offer from the advertisement no longer seems so attractive.
It is similar to bank advertisements. What is advertised is always true, but not everyone can get credit from advertising.
A client from our example was attracted by Bank A advertising, which states that it offers an interest rate on a loan of 5.00%. As the interest rates of other banks are over 6.50%, this 5.00% immediately prompted the client to take action. The client went to the bank for the purpose of informing the credit line in more detail. After an hour and a half talking with the banker, the client learns that the interest is really 5.00%. But he is not a client who meets the conditions of obtaining a loan at such a low interest rate. Reasons:
- employed by an employer with fewer than 50 employees
- his income is less than HRK 7,000.00
- 70% of loans must be used to refinance existing liabilities
The client was ultimately offered a loan at an interest rate of 8.00%.
Customer disappointed with this bank’s offer, goes to Bank B. This bank advertises a loan with an interest rate of 6.50%. As in Bank A, the banker first investigated the client’s needs and determined his creditworthiness. The interview lasted an hour and a half. The client was informed that he could not get a loan at an interest rate of 6.50% because:
- he is over 40 years old
- already has one long-term loan in repayment
- has 3 dependents in the family
The client was not satisfied with the bank’s terms and his credit request was denied.
The next day, after business hours, the client again decides to sacrifice some of his spare time for the next credit search. On the Internet, he found an offer from Bank C – a loan with a 7.00% interest rate. He is still less than the 8.00% offered in Bank A. After more than an hour with the bank, the client has learned that he meets the basic conditions of the loan. He was provided with forms and a list of documentation that he should collect. After five days of collecting documentation and another five days of waiting for a response from the bank, the customer received bad news. The bank can offer it a loan with interest of 8.50% because:
- has already had two rejected credit requests in the last week
- no 12 months of service with the employer
- the employer received a poor credit rating
After two weeks of searching, the client was again at the very beginning, with no credit and no information needed. He could not get any credit from the commercial.
Comparison of non-purpose cash loans
Although the process of realization is relatively easy and straightforward, the standalone comparison of non-purpose loans and the process of choosing the right one is very complex and not very harmless.
It is a common opinion that a cash loan should be selected based on the interest rate. This view is wrong, and relying on this information alone is a bit naive. A loan with a lower interest rate may not necessarily be a more favorable loan. Therefore, the comparison of cash loans should be taken very seriously. In addition to the interest rate, the cash loan should also be compared by the loan processing fee, the security instruments, the interest rate volatility, the currency of the loan and the method of repayment of the loan.