What is the difference between credit and consumer credit?

Although we deal with broadly understood finances almost every day, it often turns out that the problem is for us to define even some basic concepts. On the one hand, it can be evidence of what experts of all kinds often say, namely too low level of economic awareness of our society.

Credit and consumer credit? 

credit score

On the other hand, it is not uncommon for problems with a precise distinction between two different concepts to a large extent simply due to the ambiguous nature of Polish provisions. It is this remark that applies to the distinction between the terms consumer credit and consumer credit.

In practice, these two terms are very often used in a completely interchangeable way. What’s more, this type of practice can often be found even in the press or websites. However, it is worth realizing that, despite very similar names, consumer credit is by no means the same as consumer credit .

Let’s take a closer look at this issue

credit score

First of all, it should start with the fact that the concept of “consumer credit” has a utilitarian rather than formal character. The law itself does not separate such a category of financial products as consumer loans. It would seem that this fact may be a bit easier from the point of attempts to define both concepts, but this is not entirely true. On the one hand, we are dealing with the Consumer Credit Act, which uses the term consumer credit not only in relation to services provided by banks or Cooperative Savings Banks, but also in relation to services provided by loan institutions. From this perspective, consumer credit will be, for example, online payday loan, non-bank installment loan or loan line.

On the other hand, the Banking Act defines the concept of credit as referring to financial services provided by banks. It is no wonder then that in practice an alternative and a slightly more precise concept has emerged – consumer credit. Let’s follow this through several points containing the most relevant information:

1. Each consumer loan is also a consumer loan, however, a consumer loan need not be a consumer loan

2. A consumer loan is also a loan granted by a loan institution (remember that a loan institution is an entity appearing in the Register of Loan Institutions kept by the Polish Financial Supervision Authority)

3. The provisions contained in the Consumer Credit Act shall apply to consumer loans

4. The Consumer Credit Act regulates the way not only banks, but also lending institutions operate

5. Consumer credit is a service belonging to the definition spectrum of consumer credit, which means that credit cannot be, for example, “consumer” and “mortgage”

Sounds complicated? Unfortunately, this is more or less the way in the current Polish legal reality. If, for example, we tried to eliminate the use of the concept of consumer credit, which is not specified by law, we would only get more chaos. It should be taken into account that the definition of consumer credit includes solutions as different as a credit card, revolving limit, installment loan in a bank ( consumer loan ) or non-bank installment loan .

What situations do the provisions of the Consumer Credit Act apply to?

credit score

It has already been mentioned that consumer and consumer credit is by no means one and the same. At the same time, it is worth realizing that the legal regulation of the concept of consumer credit also applies to the so-called non-banking sector. What does this mean in practice? Primarily:

1. A distinction should be made between legally operating lending institutions (entities appearing in the aforementioned RIP operated by the Polish Financial Supervision Authority) and other entities which in practice may also grant loans.

2. The provisions on consumer credit theoretically apply to all possible lenders, however, in practice only clients, banks, credit unions and lending institutions can be considered reliable lenders.

3. Companies with the status of loan institutions are not only obliged to act in accordance with the provisions of the Consumer Credit Act, but are also subject to supervision by the Office of Competition and Consumer Protection. However, in relation to other categories of non-bank lenders (parabanks, pawnshops, lenders), one should rather talk about the lack of systematic supervision.

4. Non-bank lenders , who do not have the status of loan institutions, very often appear on the Warning List of the Polish Financial Supervision Authority or the Consumer Warning List of UOKiK

Summary information about loans

credit loan

So, as you can see, the issue of differences between the terms consumer credit and consumer credit is really important. Practice shows that customers using, for example, popular payday loans often do not even realize that a given loan is a consumer loan in accordance with the law, which imposes certain obligations on the lender, and the borrower grants certain rights.

Meanwhile, knowledge in this area and awareness of the formal difference between a lending institution and other types of non-bank lenders in many situations can be of great importance for our financial security.

Consequences of a loan being not repaid on time

By borrowing money from a loan company, you will have a maximum of 61 days (InCredit, Money Man) for their return. If you do not pay back the loan on time, the lender will have the right to start the recovery procedure and charge you with additional costs. Today we will tell you what consequences you should take into account, delaying the return of a quick loan.

Just a few months ago, before the anti-usury act came into force, the costs associated with late repayment of liabilities could have been really high.

Delaying the return of a quick loan

cash loan

It was not uncommon for the monthly cost of reminders, i.e. reminders of debt and the need to pay back a loan, to be as much as 40% of the payday amount.

People who wanted to “buy some time” to be able to generate the amount needed for repayment could continually extend the cash return period. Of course, you pay dearly for it.

What is the situation today?

cash loan

Pursuant to the new law, the maximum fees resulting from late repayment of loans are currently equivalent to 6 times the NBP lombard rate, i.e. 15% per annum.

This means that in the case of a loan in the amount of USD 1,000, one day of delay in repayment will cost you USD 0.41, 15 days – USD 6.16, and 30 days – USD 12.33.

Admittedly, compared to the amounts of prompts before the introduction of the new law, they are proverbial pennies.

Not just the financial consequences

cash loan

If, despite reminders, the borrower still does not repay his debt, the lender will be able to refer the case to an external debt collection company or take legal action.

Considering the fact that loan companies have stopped earning money from latecomers, they do it much more willingly and faster than just a few months ago.

A good example is the Pandamoney company. In the loan agreement concluded with this lender we can read:

“Failure to reimburse the total loan amount together with interest and additional costs on time may result in the Borrower’s debt obligations being transferred to a debt collection agency or legal action against the Borrower after 7 days from the first unsuccessful request for payment received by the Borrower.”

Therefore, the case may be transferred to an external debt collector faster than it may seem.

External debt collection and what next?

External debt collection and what next?

If the case is transferred to an external debt collection company, we will also have to cover debt collection costs in addition to the loan amount and any additional fees.

If the case goes to court, the next stage may be the bailiff’s seizure of remuneration and even property.

Entry in the register of debtors

If the delay in repayment lasts more than 60 days, the lender has the right to put the debtor’s data in the register of debtors – National Debt Register, ERIF Register of Debtors or BIGInfo Monitor.

The amount of debt should be at least USD 200 (already with interest).

Importantly, the lender is obliged to inform the debtor of his intention to enter his data in the register of debtors. He should do so by sending a registered letter, at least 30 days before entering.

Entry in the debtors database can make it more difficult for you to do such simple things as signing a contract with an internet or mobile operator.

Information in the Credit Information Bureau

Another consequence of late repayment may be the transfer of information on debt to the Credit Information Bureau. Such information will worsen the borrower’s credit history and significantly reduce its rating in BIK.

If the borrower repays his debt, the creditor’s obligation will be to inform the registers of the debtors. This information will cause the late client’s data to be removed from them.

In the case of BIK, however, the case does not look so good.

A negative credit history can follow you for up to five years, making it much more difficult to borrow more.

Why choose fast credit? – Special features of the offer.

A machine to buy, unpaid debts to settle, a holiday project for Christmas, various events jostle in the life of an individual over the course of a year. It is certain that without the necessary financial means, the management of all these events becomes complicated. However, applying for a bank loan is not always easy, when you know that you have to meet all the requirements of the credit institution.

In addition, the file is dragging, the response is often late, which creates discomfort in the execution of the project. The solution to all of this is unequivocal fast credit.

How does fast credit work?

How does fast credit work?

Tired of being forced to answer the banker’s interrogations and submit to fairly drastic conditions? Choose to take out credit online fast. This specific loan makes it easy to obtain $ 5,000 in less than a day, or even more, depending on the conditions of the lessor. The repayment period can be extended to 84 months to have fairly reduced monthly payments.

This is a great advantage knowing that borrowing costs can weigh on the individual’s monthly budget. Either way, most urgent credit deals can unlock short-term funds. If it happens that the borrower decides to terminate his contract, he generally has a withdrawal period of 14 days after signing the agreement.

In addition, students can also claim to take out fast credit. Indeed, if the legal age to access the service of banking establishments is 21 years, fast online credit is accessible to any person, from the age of 18 years. Any beneficiary can use the loan for their own needs, whether it’s paying school fees, making big purchases, or financing a trip.

What are the steps to get fast credit?

What are the steps to get fast credit?

To unlock credit quickly, online subscription is the most convenient method. There is no longer any need to go to a bank and undergo lengthy procedures to validate the request. Today, you just need to go to an urgent online credit platform and quickly fill out the form to send your request.

In less than 72 hours, or even a day, the requester obtains his response. If his request is accepted, a contract stipulating the conditions of the offer will then be sent to him for signature. He has the time he wants to study the contract. As soon as he has read and approved it, he will then have his loan.

Is it possible to renegotiate a fast loan?

Is it possible to renegotiate a fast loan?

Normally, the signing of a credit contract is irreversible once the withdrawal period has passed. This means that the borrower will have to repay his debt until the end of the term. On the other hand, it is possible to renegotiate the terms of the rapid credit, that is to say the schedule, the rate and the borrowing conditions by contacting the lessor.

The renegotiation of the credit will depend on the reasons of the borrower, whether he is in financial difficulty or wants to quickly free himself from the weight of his monthly payments and settle the rest of his debts. Note that you must pay the processing fees for any request for rapid credit renegotiation and that the interested party will also have to pay additional compensation in the event of early repayment.

Real estate credit: how to negotiate well with your online bank?

Successfully negotiating a mortgage is a perfect mastery of certain financing parameters. What are the essential points to consider for optimizing the cost of a mortgage?

Credit rate

Compare the offers of credit in order to appreciate the advantage you have in accepting the offer of credit if the rate is fixed. If the rate is variable, it is essential to know its index and the margin of online banking. From this moment, the sum of these two parameters determines the real rate. It should be remembered that the more profitable the loan, the lower the bank’s margin. However, check in the loan offer, the effectiveness or not of a security relating to a maximum rate.

Credit insurance

Credit insurance

You have more to gain by effectively negotiating loan insurance than focusing on the interest rate. Insurance is generally required by banking institutions and represents almost 20% of the total cost of credit. It is important to understand that a specialized insurance institution is likely to lower the rate to 0.14% for example for the benefit of a young borrower. On the other hand, insurance companies which are under the supervision of banking establishments are less flexible. They do not integrate certain considerations such as age, lifestyle etc.

They have a rate of around 0.40%. Then ask your online bank for the possibility of taking out external “delegation of insurance” insurance. Rest assured, you have the right to do so and moreover, if the bank had another proposal, it is obliged to justify its choice to you.

Early repayment and penalties

Early repayment and penalties

You should remember and make the request for the cancellation of penalties on the anticipation of reimbursement to your online bank. This must be done at the time of credit negotiation. Indeed, it may happen that you have other ambitions during the reimbursement period. So you can decide to sell the property and focus on something else. If the nullity of penalty clause is not clearly defined when requesting the offer, you will be obliged to pay it. It is also equivalent to 3% of the amount owed with six months of interest cap.

File study and brokerage fees

The current competition leads the majority of financial establishments to the abolition of brokerage fees or case study. In addition, these costs are less significant compared to other products and services. Suppose that an online bank offers you a rate of 4% for a credit of 100,000 USD to be repaid over a period of 20 years.

If the cost of studying the file comes back to 1,000 USD for example, the initial rate will tacitly drop to 4.08%. A bank which would offer for the same loan a rate of 4.04% with the free of charge of said administrative and brokerage fees would be more beneficial.

Credit Break

Credit Break

Negotiating a credit break allows you to relieve yourself in times of financial constraint. Indeed, this break favors the postponement of certain deadlines. A good negotiation can give you the right to make 4 breaks of around 3 months. This is equivalent to a period of 1 year for the termination of payment of installments. As a result, such negotiation is more economical for you than “loss of employment” insurance, which will be very expensive for you.