The most popular service provided by commercial banks is a consumer loan to individuals. And no wonder, since this type of lending is able to bring good income for the financial institutions of our country. This is due to significant interest rates. So, for a year, taking into account commissions and interest, the consumer overpays about 40% of the loan body.
Consumer loans to individuals: some characteristics
Market - individuals, wage workers. Credit is granted only to wage workers. The loan amount depends on the size of the wages of the latter. Even if the bank’s advertisement says that theoretically you can get a significant amount of cash, in practice the loan will be calculated only on the basis of your income level. Basically, the maximum loan amount is about three salaries. Subsequently, if the payer fulfilled his obligations on time, the bank may increase the limit to six average monthly salaries of the borrower.
The interest rate on consumer loans to individuals is much higher than on other loan products. This is associated with high credit risks: in fact, this type of loan is not secured by collateral. In addition, there is always a risk of a person being fired from work, and subsequently payment delays occur. Such a concept as low consumer credit is a marketing move of financial companies. With low rates, it will be unprofitable for the bank.
It is advisable to familiarize yourself with the terms of the loan before choosing a creditor bank. There are times that in advertising you can hear only one interest rate, but in fact there are still monthly commissions, insurance, and more.
Does the bank check the borrower when applying for a loan?
Each bank is reinsured and tries to reduce its risks. Therefore, when borrowers apply for a consumer loan to individuals, the bank carries out a comprehensive check.
The borrower is first checked through the credit bureau (BKI). If you have already taken a loan, BKI will issue information on repayment to the bank upon request, and will also form your rating. The further decision of the bank on lending to a potential borrower depends on this information.
Each bank has a different approach to credit history: some take information for the past two years, others for five years.
Separately, I would like to mention consumer credit without income statements. The amount in such loans is much lower than with certificates, and the rates are much higher. Therefore, it is recommended to use such a loan only in extreme cases.
Points to consider for potential borrowers
- Before you take a loan, you need to think carefully about this point. Without special need, you should not take it.
- Please note that it is comfortable to pay on a loan that does not exceed 25% of your net income. In this case, the borrower will have free money, intended for other needs.
- You should not take a loan "to the eyeballs", as a change in your salary downwards will lead to delinquencies in the loan.
- Keep track of your credit history, because you never know what can happen in life, so take care of the future.