Personal loans are a kind of contract that is signed with a lender or a traditional bank, through which you have an amount of money that can be used when needed.
Once you have returned it, you will have the possibility of having it again. In practice, there are numerous types of credits from Astro Finance we want to talk to you next.
How does a personal loan work?
A personal loan works, as we have said, through a contract. A lender will grant you an amount of money with a fixed limit. You will not always be given the money immediately at the beginning of the operation, but normally, its operation is based on the needs of each moment. However, a current account or a credit card will always be used.
Credits are financial products that are instrumented in the same way as loans. That is to say, the lender delivers a quantity of money to the client and this returns it in monthly installments or in a single installment at the end of the expiration term, depending on what he has chosen. The difference between one and the other is that according to the clause that is agreed upon, normally in a loan the money will be available once it is amortized.
Also, a personal loan is a formula that is frequently used by companies and freelancers. The operation is based on the delivery made by the entity and which is partial and in accordance with the client’s request. The customer will have the money amount at their convenience. In addition, if you hire one of them, you will only pay interest for the money that you have actually arranged, although a small commission is also charged on the balance that has not been arranged.
As you go back the money you can go having more, but you can never exceed the limit. In turn, loans are granted over a period of time, but unlike loans, they can be extended or renewed when the maturity is reached.
The fact that personal loans are usually granted to self-employed workers and companies does not prevent you, as a private individual, from applying for one. It is possible and, in fact, it is also usually done for cases in which there is a specific economic event or money is suddenly needed. This is what we call consumer credit and in such cases, although it is possible, it is not common to agree on the possibility of renewing credit.
Types of personal loans
The differences between the needs of consumers and companies or self-employed loan applicants have led to a varied offer of this financial figure. The differences are mainly observed in their interests, in their amount and in their general characteristics.
1. personal loan with fixed interest
The personal loan with fixed interest has the particularity that the generated interest does not vary. This is reflected every month, that is, you will not see any deviation during the amortization period. The advantages of the formula are quite clear: you can always see the price of the loan without its alteration being possible. However, precisely because it is not variable, you will never benefit from the possibility of a general lowering of interest.
The duration of this type of credit does not exceed one month. Also, the interests are fixed at the time of hiring and you will never find any alteration, small print or hidden fees.
2. Personal variable interest credit
It presents many differences with the previous one. In this modality, the variable interest rate will change during the term of the contract. For its calculation, a specific interest rate is taken as a base and a percentage that is expressed in percentage points is added.
The model that is usually used is the Camibank. The client that contracts this kind of credits always pays a variable interest that corresponds to the agreed percentage. This can be beneficial in cases where interest is low, although it can also go up.
3. The personal loan of mixed interest
Personal loans that have a mixed interest have a different formula than the previous two. Here the two typologies that we have mentioned are combined. Normally you start with a fixed type when the amortization period starts and changes to a variable one over time.
Requirements for acquiring personal loans
People who do not have resources but do have a brilliant business idea usually find in personal loans a great ally to carry out their business projects. The same happens to people who have specific needs for money, such as the payment of school books or the possibility of enjoying a special vacation.
Personal loans can be granted by banks, but, normally, the requirements that they demand to fulfill are much harder.
In personal loans provided by private entities, you will only need to comply with basic conditions: in the case of entrepreneurs, the business project is viable. For the rest, we tell you below what the requirements are.
How can you get a personal loan?
The first step for you to access a personal loan, in the case that you are self-employed, is to prepare a business plan. The credit institution or organization that has an interest in the project will help you design it in a way that is solid for the future.
If you want to obtain this financing, you must present the documentation required. Once you have presented that business plan you must comply with the requirements that we will detail. If you are an individual, you will not need the business plan, but you will fulfill the other requirements.
Conditions may vary from one entity to another. Often, they ask you to fill out the application form first. In addition, to present a copy of both sides of the DNI or NIE, document with which you will verify your identity to avoid fraud, in addition to showing your residence in Spain, which is also usually an indispensable fact. In accordance with which cases they can ask for a curriculum vitae .
It is also possible that you will be asked for a report of your work life. This report, if you have a contribution history in Spain, will be issued by the General Treasury of the Social Security. In turn, you may have to show the income statement that you made the previous fiscal year and the personal or professional references.
In conclusion, if you want to acquire a personal loan and be a successful candidate for it, from Astro Finance we recommend that you look for information on what kind of own funds you should contribute.
In addition, if you are a self-employed looking to expand your business, you must submit the budgets or proforma invoices that prove the investment, as well as the proof of payment of credits that you are already paying, in case these exist .
In the same way, it would be convenient for you to obtain an authorization to request a report from the CIRBE (Risk Information Center of the Bank of Spain). In short, a credit history of individuals and legal entities.
With regard to the precaution of not taking on excessive debt, you should make an assessment of your ability to pay before launching to apply for credit. In turn, you should make an estimate of the amount of money you really need. Keep in mind that personal loans are a support in case you need money for timely payments, so you should avoid using them to deal with unnecessary expenses that may later generate serious financial problems.
Our advice would be to prepare a list of your needs. So you will be fully aware of what you want to buy and you will not be in any way dragged by an excessive desire for consumption that can bring you problems. Value the wide variety of credits you have at that time.
To do this, keep track of your finances and verify that the company to which you are going to request the credit service is totally trustworthy and insist that you be informed in full of the terms and conditions of the contract. This way you will avoid double bottoms, unexpected commissions and unpleasant surprises.
The advantages of applying for a personal loan
There are many advantages that personal loans bring. If you want to use them, you will benefit from their great comfort, as well as many other aspects that you would not enjoy working with a traditional bank.
1. They are processed online
This implies that besides you do not have to go from one place to another to perform the interminable bureaucratic procedures that a bank entity would request, you have the option to request it 24 hours a day. At any time and be the day of the year, you can access the platform and request it with a couple of clicks.
2. They are fast
The requests are processed very quickly, since normally the personal loan platforms have an automated response system that, in compliance with the few existing requirements, means that your credit is granted even in 15 minutes.
Personal loans are a safe channel to borrow money. Your data will be encrypted and completely protected so that nobody can access them. Also, transactions are made directly and securely to your bank account.
2. They are easy and agile
Thanks to the credit algorithm of personal loan platforms, the process is really easy to carry out. You will not need to comply with excessive requirements, which speeds up the process more than you imagine and makes them simple enough to achieve.
The extension of personal loan
If you ask for one of these credits one day, you may request an extension for the return of the capital. The extra duration is usually 30 days after the expiration date. However, you must be aware of what the terms and conditions of the agreement are, not only because of the interests generated, but also because of the liability policy, since it would be possible that under the conditions it would be established that the personal loan admits a maximum of two extensions, for example.
So that you can avoid the increase in the interest amount that was initially indicated with each renewal, you have the possibility of paying the amount for the management of your credit. In this way, for each end of new term you will only pay the principal amount plus said commission for management that corresponds to you. The extension of personal loans, even if that possibility has been agreed upon, is carried out by means of a request, never automatically.
What if you can not pay the credit?
For situations of default, each lender establishes its own policy. It is common for these entities to understand that sometimes personal circumstances may change and admit the possibility of economic unforeseen events. For this, in that case you will have a telephone to talk to the customer service department. When you think that you will not be able to return on time, we recommend that you call as soon as possible to find the most viable solution together.
Even so, we recommend you to follow our advice of not requesting a money that you can not repay in time. The main reason is in the delay expenses that you could incur, in addition to the surcharge for each reminder notice you receive and the extra expenses that will be applied to you for the collection management. From the seventh day after the period allowed for you to pay the loan, your data may appear in delinquency records and prevent you from accessing future credits.
Now you know better how the personal loan market works. These can be really useful to get financing during difficult economic times. However, look for the best possible conditions and make sure you can return it and point out a viable deadline.