What is a credit?

Credit

Credit is an agreement between a lending institution (such as a bank, store or lending company) and you, the beneficiary of the loan. When you enter into such an agreement, you practically get cash, in a bank account or on a credit card, for personal use.

The loan repayment terms, including interest and commissions, are usually established from the beginning and are stipulated in an agreement between you and the issuing bank.

Do you want to get a loan?

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The approval of a loan is based on the credit application you submit to the financial institution and the documents you fulfill. To increase your credibility (and chances of success) in front of creditors when applying for a loan, make sure that the information in these documents reflects all your strengths.

Follow the tips below to increase your credibility as a credit client

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Increases credibility

Minimizes debt

When you apply for a loan, credit institutions look very closely at your current debt situation. Minimize the debts you have at that time. The financial institution must know that you can live with the income you get.

Credit history

Credit history is another important factor that financial institutions take into account when assessing whether you are eligible for a loan, and the card issuer has a complete history of payment behavior.

When you want to make another loan, the payer will be closely scrutinized, and your current spending will be evaluated.

Thus, the creditor can form an opinion on the ability to pay your debts. If you want to have access to a loan, you must be correct, because a payment history with many delays or “skipped” payments is totally unfavorable and is a minus in the eyes of creditors.

Income and assets

It details all the income and assets you own. Fill in this section of the loan application as thoroughly as possible. Many people often fail to include sources of income such as those from dividends, bonuses, bonuses, etc., or certain assets they own, such as land or a car.

The fact that you hold values ​​of this kind, gives the creditor extra comfort

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Correct information

Make sure the information in the application is correct. At any time, the lender may request to provide documents supporting the claims in the credit application. If you now answer questions with the highest accuracy, you will avoid further problems.

Do not deliberately provide documents containing conflicting information. The negative consequences of a lie are far greater than the potential gain: if you are discovered, your claim can be rejected without hesitation.

Types of loans

Credit cards and other types of loans are convenient because they allow you to use your money easier and can be especially useful in case of emergencies. A loan allows you to buy big expenses, such as those for the car and housing, and a mortgage allows you to buy a house without having to have the full amount of money.

Credit is also a big responsibility. Using a credit improperly can lead you to accumulate unmanageable debts and to a financial crisis. The more you know about credit, how it is administered and the signals that show you need help managing it, the easier it will be for you to use this powerful tool intelligently.

Credit categories

You can get a loan for a well-defined purpose, such as buying a new car, paying the university registration fee or buying / renovating your home. You can, on the other hand, access a debt consolidation loan that integrates all the debts you now have from several creditors into a single repayment plan, with a lower interest rate. In general, loans fall into two categories:

  • guaranteed
    Secured credit is one where the lender requests a guarantee of the same or greater value with the loaned amount (such as a car, a house or a cash deposit), to ensure the loan is repaid.
  • unsecured
    An unsecured loan is one that has no collateral “back”.

Credit cards are probably the most popular form of personal credit. When you use your credit card it is like getting a loan. Every time you buy something, you borrow money for a period of time; if you decide to pay this debt gradually, the company that issued the credit card will incur certain financing costs, which you will have to pay with the value of the purchases made with the card.

The degree of indebtedness

The degree of indebtedness

The degree of indebtedness establishes the ratio between the debts and the incomes you obtain; this indicator gives you a clear picture of the financial situation. The lower your degree of debt, the higher the amount you can have to make savings or other things you want.

The degree of indebtedness expresses, as a percentage, the part of the net salary that will be used to pay the monthly debts and obligations. Calculate this indicator by dividing the amount needed to repay your monthly debts (including rent or mortgage) to your net salary (salary after deduction of taxes).

Many specialists recommend that you do not use more than 15-20% of your monthly net salary (excluding mortgage and rent) to pay off your debts and loans. On the other hand, you must not allocate more than 40% of the monthly net salary for the payment of all debts, including those for the mortgage.

Loan restructuring solutions

Currently, financial institutions are trying to help badly-paying customers by offering them credit restructuring schemes that allow them to liquidate their debts. If you are unable to pay the bank rates:

Contact the creditor before accumulating arrears and explain the problem.

You have to keep in mind that a client who has not accumulated debts and has a “clean” credit history will enjoy more confidence and understanding from the financial institution. You need to prove that the problems are real and can be remedied over time; when you go to the bank, take with you all the documents that can support the “cause”.

You need to be aware that debt restructuring does not, in any way, mean their deletion. On the contrary, in some cases, the final cost of the loan may increase, but you will have more time to pay it off and get the rest you need to regain your financial balance.