A guide to explore the issues concerning the personal loan contract. What are the necessary conditions for a personal loan contract to be successful? What do you need to know before signing a personal loan agreement? What are the key points that should never be missing in a personal loan contract?
Personal loan is a consumer credit product, not finalized, which provides for the financing of a certain amount of money, directly from the financial companies to the hands of the consumer; the applicant is required to repay the amount, through an amortization plan, with constant installments, at a fixed rate.
The personal loan contract establishes the conditions under which a credit institution provides a certain amount of money to an applicant; moreover, by means of this document it is possible to regulate the rules according to which the customer undertakes to return the entire amount, by installment payment.
The disbursement of a loan, therefore, is based on a written document, the contract precisely, which must be signed by both parties (the funding body and the applicant). This contract must be drawn up in a precise and exact manner, following the established rules, based on the offer: the funding body undertakes to pay the set fee and the applicant is required to ratify his commitment, regarding the repayment of the loan, in the agreed terms.
WHICH IS THE ESSENTIAL ASSUMPTION FOR A LOAN CONTRACT TO BE SUBSCRIBED AND COME TO END?
The loan contract must include a written form and no one other than the lender and the client must act as a mediator. The banks and the applicants are the only subjects that are interested in the stipulation of the contract ; to these, however, it is possible to add a third guarantor, in the event of a surety.
A loan contract can be declared valid only when a condition is satisfied, or that, in protection of both the funding body and the financed party, the latter is made able to fully understand the characteristics and the cost of the loan contract which is about to sign up.
WHAT WOULD YOU KNOW BEFORE SIGNING A LOAN CONTRACT?
Before signing a loan agreement, the customer receives the Secci or Iebcc (Basic European Consumer Credit Information) form from the bank.
This document is written in a personal manner and includes all the features of the chosen credit product, or the following:
- the loan costs, then the TAN and the APR;
- the aspects relating to the stipulation of the loan contract;
- further information on any insurance policies;
- information regarding other additional expenses.
With this form, the customer is not obliged to sign the loan contract; free from any constraint, the applicant uses the Secci document to learn about the individual elements and services offered in order to take out a personal loan.
WHO TAKES CARE OF STANDARDING THE LOAN CONTRACT?
The loan contract is a written document, which must be signed by both parties.
This contract provides a well-defined structure, drawn up in such a way as to make this document the same for all insurance companies, so as to protect the contractor from possible scams and help the funding body to provide all the information necessary for signing the contract.
The loan contract is regulated by the competent institutions, such as the Bank of Italy and the Italian Exchange Office (UIC). The provisions are mandatory and failure to comply with the regulations entails the cancellation of the contract.
WHAT ARE THE FUNDAMENTAL POINTS THAT MUST NEVER MISS OUT WITHIN A LOAN CONTRACT?
A loan contract provides a precise form, regulated by specific rules and characteristics; for example, it is essential that this type of contract contains within it the following information:
- the type of financing chosen by the petitioner;
- the actual sum
- the amortization plan, ie the repayment installments, their number and frequency of administration;
- the TAN (Nominal Annual Rate), or the interest rate applied;
- additional costs and charges, calculated based on the interests of the TAN;
- the default charges, provided in the event of late payment of installments;
- the APR (the annual percentage rate), including interest and additional charges;
- the methods and conditions under which the APR can possibly be modified
- insurance guarantees underwritten according to the loan;
- the possible existence of additional guarantees, but binding payment of the loan
- any charge not included in the calculation of the APR.
WHAT ARE THE GUARANTEES PROVIDED FOR MAKING A PERSONAL LOAN CONTRACT?
Usually, the provision of a personal loan is not subject to the presentation of real guarantees, such as, for example, a mortgage on owned assets. However, it is possible, that sometimes, in order to limit the risk of insolvency, credit institutions require the customer to change the installments, in multiple or in a single solution, so as to insure a part or the entire amount disbursed.
The most widespread form of guarantee is that which provides for the signature of a co-obligor or a third guarantor, who acts as guarantor of the applicant, in the event that the latter is incapacitated to pay the installment.
This request appears to be quite common when the customer is elderly, or if the requested sum is particularly high.
However, it is not possible to establish a general rule, valid for all insurance companies, as each acts and imposes certain guarantees at personal discretion, based on the case and according to the risk profile of the individual customer.
HOW TO CHOOSE BETWEEN THE VARIOUS PERSONAL LOAN PROPOSALS?
When the choice of receiving a loan falls on different offers, it is useful to reflect and consider not only the amount of the monthly installment, but above all the cost of the total amount.
Many times, however, it is not easy to fully understand this sum, as the contract provides for the listing of a series of expense items that refer to the total, but which in reality are not., including the amount disbursed, interest, ancillary charges, any initial expenses, insurance costs; this is one of the biggest flaws of the personal loan contract, as it is not very clear to understand and immediately measure the amount of the total sum.
Therefore, before choosing and signing a personal loan contract, it is essential to consider the following items, present in the document, namely:
- the TAN;
- the APR
TAN is an annual interest rate, expressed as a percentage; it is calculated on the financial capital, starting from the financed amount and the duration of the loan, so as to establish the share of interest, which will then be added to the capital share: in this way, the credit institutions determine the amount of the repayment installment.
The APR is always an annual interest rate, but is calculated on the total cost of the loan, including any additional charges. However, the Italian legislation provides for the exclusion of certain incidental and optional expenses, which may not be counted in the calculation of the APR: before proceeding with the subscription, therefore, it is essential to pay attention and carefully consider the overall expenditure to be incurred, evaluating all the offer items.
Furthermore, the following conditions should be borne in mind:
- for the same amount paid, the APR decreases proportionally with the increase in the duration of the loan.
- with the same duration, on the other hand, the APR decreases in proportion to the increase in the amount of the loan.