Currently, banks offer a wide range of loan products, depending on the purpose, availability of collateral, time for consideration of the application, loan terms, etc. How to choose such a product and not overpay on interest rates? Consider a bank loan and its types.
The main principle of lending: the higher the risk of default on debt, the higher the interest on the loan. Risks are the loss by the borrower of earnings, source of income, loss, theft, damage to the subject of the pledge, absence of a guarantor, a long loan period, old or too young age of the borrower, and so on. Therefore, before issuing a bank loan, the bank seeks to minimize its risks by requiring a statement of income, a copy of the
work book, obtaining a pledge, attracting one or more guarantors,
life and health insurance of the borrower (especially when issuing
long-term loans), insurance of the subject of pledge.
The most common bank loan is a consumer loan. It is issued for the purchase of household appliances, building materials, electronics, automobiles, etc. It is divided into target and non-target. A targeted consumer loan is issued exclusively for the purchase of a certain product or property, for example, a car, a house, for home renovation, for education. The interest rate for targeted loans is lower than for non-targeted ones, since bank risks can be reduced by pledging acquired or repaired property.
If you need money for training, pay attention to such a direction of lending as loans for education with state subsidies (total rate - 11.25%, of which the borrower pays only 5.06% for the period of study up to 10 years) and without subsidies (12 % per annum for up to 11 years). The list of universities participating in the education loan subsidy program has been approved by the Ministry of Education. Educational rates are much lower than other consumer loans. In addition, there is a grace period for the repayment of principal and interest.
A bank loan for the purchase of a car (car loan) differs from a consumer loan for the purchase of a car in that when it is registered, a car is pledged. To minimize the risks of losing the pledged item, banks require to insure the car not only for compulsory motor liability insurance, but also for hull insurance. Title and a copy of the certificate of registration of the purchased car remains with the bank until the debt is fully repaid. Minimization of banking risks in this way allows you to set lower interest rates on car loans (from 14.5% per annum). In my opinion, if a new car is purchased from an authorized dealer, you should choose a car loan with a subsequent deposit. The main reasons: a lower interest rate on the loan and low CASCO rates for a new car. In the first year of using this CASCO machine you need to buy, not only because it is a prerequisite of the bank, but also for the sake of a quiet sleep and ride. If the car is purchased second-hand, the seller is a neighbor or a friend, you should apply for a consumer loan to buy a car without a pledge. The interest rate will be slightly higher than a car loan with a pledge. Under this bank loan, requirements are established for the year the car is manufactured: it must be "not older" 5-8 years (each bank has its own credit conditions, I quote the most common ones). After the purchase, the bank will need to prove that you purchased the car, and did not spend money on something else. Bring the PTS and the vehicle registration certificate to the bank, the bank employees will take a copy from the documents, the originals will be returned to you. If you buy a car that does not meet the above requirements, there is nothing left but to arrange a regular consumer loan or a loan for emergency needs. The interest rate on this loan product starts from 17-18% per annum, subject to the availability of a guarantor.
The most popular and inaccessible for most residents of Russia is a bank loan secured by real estate (mortgage). This is due to the fact that interest rates on them do not differ so much from consumer targeted loans (from 12% per annum). Mortgages are granted for a long term; stringent requirements are placed on the solvency and age of the borrower. As noted in the Agency for Mortgage Lending (AHML), on average, Russians issue a mortgage for 17 years, repay for 10 years. But even with the early closure of the loan, the overpayment is astronomical. Mandatory conditions for a mortgage: the presence of a permanent job, a pledge of the acquired property, real estate assessment and insurance, an initial payment of 10-15%.
If you want to save on bank interest, you should take care of your credit history, pay monthly payments on time, try to apply for a loan in one or two banks, in which your credit reputation will be formed. Banks offer preferential loan rates and milder lending conditions to regular and reliable borrowers. You can start your credit history by opening a credit card of a reliable bank with open credit conditions, without hidden fees. With this card you can periodically pay for current purchases and pay off arrears during the grace period without paying interest for up to 50 days. Many banks “give” a free first year of card service.
Another tip for those who want to save on bank loans is to try to take them at the bank on whose card your salary is transferred. The bank will not ask you for a salary certificate and work record for sure and will also offer a preferential interest rate on many loans.