What is credit and what are the fees associated with it? Be sure to read this article and learn more!
Each commitment involves additional costs. Few borrowers, however, are aware of what proportion of their receivables are commission or margin or any other fees. Meanwhile, the banking institution must earn something, which results in various amounts that increase the amount of the loan. In the following text we will tell you about the most popular fees. We’ll take a close look at the margins, among others.
It’s no secret that the higher the loan amount, the greater the amount of all kinds of fees. The loan period is also of great importance. The longer – the worse for the borrower, because it is associated with an increase in interest charged by the bank. What else has an impact on the total cost of the commitment?
What is a loan?
First of all, to understand the essence of credit fees, you need to answer the question what exactly this type of liability is. A loan is a contract concluded in writing between a banking institution or a company specializing in such services and the borrower. One of the parties undertakes to transfer the amount specified in the contract to the other, and the recipient ensures that he uses it for the purpose indicated. In addition, his duties include repayment by a specific date. Therefore, loans are purposeful, maneuverable and payable.
Loan and credit
Many consumers confuse credit with loans. Meanwhile, these are two different financial products. Loans are the domain of banks, loans – of companies created for this purpose. Lending is regulated by the Civil Code, while loans are regulated by the Banking Law. The first ones reach quite low amounts and are highly interest-bearing, the second ones can even amount to many millions of zlotys, and the decisive criterion for their award is the so-called creditworthiness. We write more about it in articles: Creditworthiness – what do you need to know about it? and Creditworthiness assessment, i.e. point scoring. When applying for a loan, please state the purpose for which the money will be allocated. The bank also checks potential borrowers in debtors’ registers, which most loan companies do not. The main difference is also that the activity of banking institutions is monitored by the Polish Financial Supervision Authority, the state has no such strict supervision over non-banking institutions. You can read more in the article Loan and credit – what are the differences.
Types of loans in Poland
There are several types of credit products. Basically, they are divided into liabilities for enterprises and individuals. Economic entities may apply for, inter alia, a working capital loan, including overdraft, seasonal or a renewable and non-renewable credit line. In addition, the banks’ offer includes an investment loan, which is granted for a specific purpose related to the company’s development. Private individuals also have a large selection. Each of us can apply for a housing loan, i.e. a mortgage, as well as a consumer loan, which includes a cash, car, student loan and in the so-called current account.
How to infer?
The mode of action in each case is exactly the same. The first step you should take is to go to the bank branch with the application or fill it in and send the institution electronically. For the sake of comfort and valuable customer time, more and more banks allow the possibility of applying for a loan online. In the application, enter your basic data, loan amount and repayment period, as well as the purpose and amount of your own contribution. The lender will analyze the applicant’s financial situation and check his data in the BIG, BIK or KRD debtors’ databases. If the potential borrower does not appear in these registers, the institution will assess the creditworthiness.
How do you calculate your credit potential?
A number of factors affect scoring, i.e. a tool that allows the applicant to assess his repayment ability. The applicant’s age, marital status, education or credit history are taken into account. The bank also draws attention to the very parameters of the liability, i.e. its amount and loan term. On this basis, a decision is made. If the application is successful, the customer has nothing else to do but review the terms of the contract. In case of any doubts, of course, it has the right to consult them with a bank employee or visit a lawyer.
Credit and fees
One of the points of the contract that should be given special attention is the one that specifies the total cost of the loan. Most consumers only analyze the interest rate on the liability itself. This is a big mistake! The amount of costs consists of more factors. Adding all fees may surprise many borrowers. In addition, their amount may change even during the term of the contract! Each of the banking institutions approaches this matter in a different way. Therefore, it is also important from the point of view of the wealth of our portfolio to ask for such details in the bank. The tables of fees and commissions constitute an attachment to the contract, which is viewed by few interested parties.
Bank’s margin and mortgage
A mortgage is a long-term mortgage-backed liability. It may take the form of perpetual usufruct rights or property strictly specified in the real estate contract. The long loan period is followed by a high loan amount. In most cases, the purpose of taking it is to buy an apartment or build a house. One of the key elements when it comes to mortgage costs is interest, and therefore also the margin.
Is the loan margin exactly?
What is the mortgage margin – this question is asked by many borrowers, but not everyone knows the right answer. In short, it is one of the two components of the interest rate on the commitment. The second is the interest rate, which is set by the bank. Compared to the margin, it is not constant. Mortgage margins do not change over the duration of the entire contract. In practice, they constitute the bank’s real earnings from the loan granted.
Mortgage margin – what is worth knowing about?
Each banking institution imposes its own margin on its clients. It calculates, among others, on the basis of currency stability, the amount of own contribution, income or the type of pledged property. Thus, we see that mortgage margins are highly individualized. The higher the risk of lending money to a customer, the higher the margin will be. It is to be a form of compensation for a bold decision to borrow money.
Bank’s mortgage margin and negotiations
Borrowers who can boast of a good financial past, an important goal they incur, and a solid own contribution should negotiate the margin with the bank. In fact, this is the only fee that a banking institution can easily pay. Importantly, these entities are happy to reduce mortgage margins in situations where the customer decides to use other financial products. For example, about deposits or savings accounts.