Personal loans can be used to finance expenses linked to important life events, as well as unforeseen expenses that may find us short of finances or, especially today with the crisis, even the middle class struggles with the portfolio lightened by taxes and heavy taxes, even just to get to the end of the month.
Every occasion is propitious and sooner or later the need to request a personal loan arrives. This is a consumer credit product that provides for the financing of an amount at a fixed interest rate, repayable according to a repayment plan in constant installments.
It falls into the category of non-finalized loans or not aimed at directly financing the purchase of a specific good or service that represents the objective of the targeted loans.
In the case of personal loans, on the other hand, the contract is signed directly between the financing institution and the applicant.
Without real guarantees
In general, the granting of a personal loan is not subject to the presentation of real guarantees (or pledge or mortgage rights on assets owned by the applicant).
Sometimes, however, in order to face the risk of insolvency, the financial institutions submit to the client the repayment of the installments, or a single bill, able to guarantee a part or the entire amount disbursed.
The use of a guarantor as a co-obligor or a third guarantor is also very widespread, which guarantees the success of the operation, especially when the applicant has a recent seniority, a professional precariousness or requires a large amount.
The elements of the loan agreement
The loan contract establishes the conditions under which a loan is granted which is then repaid over a specific period of time by payment of installments.
It must be signed by the bank or financial institution, which must declare with precision and precision the actual conditions of its offer of money and by the applicant, who must ratify his commitment to repay the loan according to the agreed terms.
By law a personal loan contract must contain:
- the type of financing;
- the amount of the loan and the methods of financing;
- the number, amounts and expiry of the individual installments;
- the Annual Global Effective Rate (APR), which includes interest and additional charges;
- the detail of the analytical conditions according to which the APR can possibly be modified;
- the amount and purpose of the charges that are excluded from the APR calculation;
- any guarantees required;
- any insurance coverage required and not included in the APR calculation.
Unless expressly provided for in the contract, no sum can be charged to the customer in this way. I the failure to respect even a single condition involves the nullity of the contract.
(A personal loan for any eventuality)
Once the request for a personal loan has been received, the lending institution applies the following evaluation criteria, in order to decide whether to grant it:
- Risk policies
Each institute applies its own risk policy in the assessment of requests, based on statistical data ( credit scoring) in order to keep insolvencies below a certain ceiling.
- Income level
The level of income of the applicant is also decisive, in relation to any repayment installment, since if it is too low compared to the latter, it will be difficult to sustain by the debtor who could incur a possible default.
The creditworthiness of the customer is no less decisive for the purposes of accepting the request. Banks and financial companies assess the level of risk associated with each request, also based on the credit reports provided by the Central Risks. If the credit history of the applicant is late in repaying previous loans, outstanding, etc., the likelihood that the request will be accepted may also fade.
In case of default
In the event that the customer interrupts the repayment of the loan, he becomes in default with the lending institution with the consequence of having to pay higher interest subsequently, due to the application of a default.
Furthermore, your name may be included in the list of latecomers and / or reported to the Central Risks, with the unfortunate consequence of seeing their creditworthiness impaired and encountering greater difficulties in obtaining credit in the future.
Failure to timely pay even a single installment authorizes the lending institution to unilaterally terminate the contract. The customer will be required to pay all bank and protest charges as well as all the costs incurred by the Institute to recover the sums due, in addition to a possible penalty.
Early repayment of the debt
If you decide to pay off the amortization plan by paying off the loan before the agreed deadline? According to current legislation it is possible.
Those who choose to exercise this option will have to repay the residual capital still due, but also pay a penalty which, by law, cannot exceed 1% of the financed amount.
If the contract does not specify the amount of residual capital after each repayment installment, the sum of the present value of all installments not yet due on the date of early repayment shall be understood as residual capital.