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Reasons why you would not apply to a loan

Have you already applied for a loan? Well let us tell you that there are two sides of the coin, one can be approved and another can be rejected. We want to help you understand how the credits work, not all the loans requested are approved. This is due to some essential factors that you should consider.

Many people refuse your credit application

We know that it is frustrating not to know the real reasons why he is rejected. Normally before it is approved, financial institutions already have their own system and do the pre-analysis. Where customers must fill in the requested forms and gather all the necessary stationery.

First ask yourself these questions:

  1. Do you have a credit record?
  2. Do you have a problem with your credit record?
  3. Do you have a guarantee that supports your credit?
  4. Is the information provided real and correct?
  5. Do you have proof of income?
  6. Do you already know which is the best financial institution?

By asking yourself these questions, you will surely know if you can apply for a loan, now we will show you the possible reasons why you could not apply.

Reasons why you would not apply for a loan

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Lack of credit or negative record

Do you have a credit card? If the answer is no, then we recommend that you speak with a financial institution to request a credit card with a low initial amount. That way you can build your credit record and financial support.

Have no guarantees

Not all financial institutions request some type of guarantee, but sometimes they request furniture or security to use it as a guarantee of payment.

Provide false information

This is the worst thing you can do, maybe at some point it is done harmlessly in order for the credit to be approved. But it is not the right way to do it, if you know that you have a problem that can affect your credit application and alter the information accordingly you will have greater problems.

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Mortgage advice in Spain

In the chapter on mortgage intermediaries that I share with lawyer Cristina Borrallo of the book edited by Bosch ‘ Comments on the Regulatory Law of Real Estate Credit Contracts ‘, collective work coordinated by Dr. José María López Jiménez , openly criticized the myopia of the legislator when regulating mortgage advice.

A book on Law 5/2019, of March 15, regulator of real estate credit contracts that I recommend reading to all mortgaged and potential borrowers who want to know their rights and duties in depth, and professionals who decide to be experts at work Law 5/2019 considers the intermediation service different from that of advice. I do not conceive a quality mortgage intermediation without advice, moreover, a mortgage intermediary that does not advise is more a mortgage comparator than a mortgage professional.

Advice on real estate loans

Article 19 of Law 5/2019 regulates advice related to real estate loans. The first thing it does is limit the provision of the advisory service to real estate lenders, real estate credit intermediaries or their designated representatives. What is supposed to leave out other professionals, whether lawyers or economists specialized in the mortgage sector. However, the rule adds that these services may be provided by the persons referred to in article 26.3 (persons who offer mortgage counseling “as an accessory within the framework of a professional activity regulated by legal or regulatory provisions that do not exclude the provision of such activities or services, and provided that the credit intermediation activity, without constituting its main activity, is intimately related to the provision of the main contract between the professional and the borrower »), as well as persons who, without being part of the categories already mentioned, they provide advisory services, provided that they have been recognized by the competent authorities and are subject to their supervision in accordance with the requirements established in this Law for real estate credit intermediaries.

Royal Decree 309/2019 limits in this way the independent advice that, in practice, in Spain the possibility of providing independent mortgage advice disappearing in compliance with the legislation, in my opinion. It says that to be before an independent advice the following requirements must be fulfilled.

Who can be a mortgage advisor?

Who can be a mortgage advisor?

Real estate credit counseling is not a free activity. Only complying with the requirements of the regulation can be advised. I agree with Fernando Zunzunegui that real estate agents are allowed to advise, accrediting training and knowledge, in addition to lenders, intermediaries and their designated representatives.

In my view, for now it will not be easy to find an independent mortgage advisor , given the limitations and demands, sometimes absurd, of the Law.

Regulation of mortgage advice

Regulation of mortgage advice

I recommend the article by Dr. Fernando Zunzunegui , friend of the house and also author of the book edited by Bosch commented, regarding the advice on the Real Estate Credit Law ( read PDF ). His vision is that it is positive to regulate the mortgage advice separately, in which I agree, although what Law 5/2019 defines as mortgage advice I consider has no substance to separate it from intermediation. In other words, mortgage counseling is much more than the legal definition of this recent rule.

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Credit card as a way to debt trap – what are its negatives?

In many cases, you will come across a number of advantages and positives. What are you talking about? It’s a credit card that is attracting more and more banks today. If we start with a brief description, it is necessary to state that it is a credit product – not a classic debit card available to a bank account. And because it is a loan, it can itself be a risk. Often, however, larger than a classic loan. Let’s take a look at the negative aspects of a credit card and why it can be seen as a ticket to travel to a debt trap.

Management fees

Management fees

There are few credit cards that do not pay management fees. However, for most market choices, make sure you pay the fee. The most advantageous cards are tens of crowns per month. For others it can be hundreds of crowns. It should be noted that the fee is not related to whether or not you use the card. Even if you only have it in your drawer at home, you need to pay each month.

Speaking of fees, it is a good idea to be aware of the special offers of some banks. They try to give a good impression by giving their credit card product free of charge. In practice, however, this is nothing but their forgiveness for a few months. Then you will pay them again.

Interest rates are high

Interest rates are high

The credit card works very easily. You have an associated bank account with a real zero. With each use of the card you go to minus and thus use the credit line provided. And it is precisely the money spent that pays interest rates. And it doesn’t matter how you use the card. Standard applications include:

  • ATM withdrawal
  • Payment at the merchant – both classic and contactless
  • Online payment when shopping at eshop

Using the given application means that you are drawing a loan. And it is really big interest. When we mention that they are in tens of percent, we are definitely not talking about the least advantageous credit cards. We are talking about what is now considered an absolute standard. Add to this the fee and it is clear that credit card may not be anything convenient.

Minimum installment amount

Loss of overview of finances

Few know this, but the credit card is also associated with the need to think of a minimum installment. And it can often significantly complicate people’s plans. Among other things, because it can lead to various penalties or even cancellation of the card and the necessity to pay the amount spent at the same time, within a few days.

Minimum repayments are quite common for credit cards. They are either set on a flat-rate basis or based on how much money is spent. In practice, this means that if a certain amount is spent during a certain period, at least a minimum amount of money must be sent to the credit card. This is mostly used to cover interest rates. If the limit is drawn, the minimum repayment term is approaching, and the credit card owner has nothing to take from, it can be a combination of very unpleasant situations.

Loss of overview of finances

A credit card can also be a problem product in the sense that it can cause a significant loss of family or personal finances. When we look at classics, people have money:

  • On the bank account
  • At home in cash

In both cases, when paying they clearly see that money is diminishing, so it is necessary to count to keep the money. If a credit card comes into play, people have the impression that they still have enough money, as there are a few thousand left in their accounts and at home. But the cards are taken down and people usually find out from the statement. And in practice, this may mean that their budget has been quite drastically overstretched.

Significant debt

Significant debt

A credit card is a credit product, of course, to obtain income information. While for loans the conditions are quite demanding, for credit cards everything is more benevolent. Not only with regard to the fact that they may have higher approvability. It should also be borne in mind that they also involve the risk of significant indebtedness. If credit cards offered a limit of a few thousand, coupled with the possibility of solving short-term financial problems, there would be nothing wrong with them. However, it is a credit product where credit limits go up to tens of thousands and hundreds of thousands. Anyone who runs out of this amount will only return it very complicated.

Worse repayment

Worse repayment

For classic loans there is a fixed payment schedule. The repayment amount covers not only the interest itself, but also a part of the principal. Thus, the amount of the loan is reduced every month to zero. At the same time, although people can repay less, few do. Most actually pay only what they have to, and use the remaining money exclusively and only for personal consumption.

With credit cards, there are also repayment regulations, but only the minimum. They usually cover the maximum amount of the fee and interest. And since people are basically not obliged to pay more, they only send as much money as they really have to. They have been repaying regularly for several years, no longer using the credit card due to exhaustion, yet they have not yet managed to reduce the value of the spent amount.

Spending on uselessness

Spending on uselessness

When money is not visible – in your wallet or account, people think less about what the money is actually spent on. And so they spend money on useless money with a credit card. For things they would never have bought otherwise. If they have it, why not. If they do not and do not go down, it is a problem not only current, but also a problem that can be described as future. Mainly with reference to the above and that long-term debt risk.