Loan for any purpose – what to choose?
October 9, 2019
Bank financing is assumed to be cheaper than non-bank financing. Banks accept clients with a lower risk level and have lower costs of raising capital. The money in the bank will differ depending on the product. The higher the risk for the bank, the higher the price will be. How to get the cheapest financing in the bank for any purpose? Which loan for any purpose or loan will be the cheapest? Let’s see.
Cheapest as I have property
Mortgage products are the cheapest in the bank. The mortgage is a targeted product – for the purchase of real estate . Therefore, we will not write about it because we focus on raising capital for any purpose. But we have a mortgage. As part of this product, we can receive funds from the bank and spend what we want. How it’s working? Of course, we must have property free of liabilities. Therefore, it may not have entries in section IV of the land and mortgage register and easement restrictions in section III of the same. We go to the bank, submit an application, provide basic product parameters, i.e. expected amount and period. The bank assesses the risk, i.e. checks us as potential borrowers and real estate as potential collateral. If the decision is positive I will receive the money, I will be able to spend it for any purpose and the bank will enter the mortgage on my property. As part of a mortgage, I should receive a maximum of about 70% of the value of the property that will be its collateral. So if I have, for example, a flat valued at PLN 300,000, I can count on a loan of PLN 210,000. Of course, stable parameters will depend on the bank and the specific offer.
Cash loan for any purpose
If I don’t own a property, I am willing to borrow money under a cash loan. Here, the bank will usually not require security from me. Of course, in order to increase my credibility, you may ask for a guarantee, but normally a cash loan is unsecured. What does the process look like? It is much simpler than applying for a mortgage. There is no real estate checking, which always takes several days. I submit a simple application with additional documents (if required by the bank), the bank checks my creditworthiness and issues a decision. If it is positive, it gets the opportunity to sign the contract. After signing it, the bank will release funds to the account I specify. The bank will ask about the purpose, because the banking law requires that the loan has a purpose, but will not verify whether I spent money in accordance with it. If the goal is to buy a car then you should consider a car loan . But it will be a special-purpose loan, which is why we do not devote a place in this article.
Or maybe an overdraft?
The cash loan will be repaid in so-called annuity installment, i.e. interest on principal. On the other hand, overdraft is required to pay only interest. I can pay back the capital at any amount, but I am not obliged to do so. I will have to give it back at the end of the contract. The contract is usually concluded for 12 months with the option of extension. If I pay interest without disturbances, the bank will easily and most often send me a loan for another period. Allows you to deduct a higher amount from my account. The product is therefore closely linked to the current account.
Credit card, i.e. interest-free credit
The credit card gives the possibility to use the separated bank resources for free in a predetermined time. It is a good form of increasing current financial liquidity and achieving fast consumption goals. On specified dates, the bank will not charge me interest on the capital used. If I exceed the balance of required operations, I will also resign from the card maintenance fee. Therefore, I can freely borrow and give money – but all in the terms specified in the contract. If I exceed it, I will start to pay interest. Therefore, the card can be the cheapest and the most expensive product at the same time. The cheapest, because if I use it as intended, I borrow money for free. The most expensive, because if I do not return the funds on time I start to get an interest-bearing loan.
The bank has a specific pool of products
Banks do not create hundreds of types of products. Their pool is small, and the basic categories can be counted on the fingers of two hands. Loan for any purpose – you could exchange offers of banks. When looking for the cheapest financing, we must first consider what goal we want to achieve and whether this goal can be a collateral. In such situations, we can count on the cheapest money. What does the cheapest mean – it’s best to use one of the loan calculators available for any purpose. If the bank knows that we buy real estate for a loan and can additionally secure it, and the property is considered a good collateral that does not lose value over time, and even its value increases often, then it can afford cheap borrowing. If, on the other hand, we pay for something with a credit card, the bank is not sure whether we will pay back within the prescribed period, and if we do not pay back, we do not have a repayment schedule, it must raise the price.