Today we are going to talk about the issue of loans, since everyone at some point surely had or have to resort to this tool. Although I know that today's boom is mortgage loans, we're going to talk about it in another post. Today we are going to focus on what information we need to know to analyze a personal loan.
I would love to tell you that my desk is as nice as the one in the photo but it's not! That's why I looked for an inspiring image to share with you along with everything I've been researching these days on loans :)
The goal of this post is that you can quickly analyze whether or not you want to get a loan, that's why below I will list the steps necessary to analyze a loan:
1 - Identify the Amount Needed
It is important that you have a clear idea of the amount you will be requesting in order to be able to compare different options.
2 -Identify your ability to pay
In order to do this you must have identified all the income and all the monthly expenses that you will have to face during the term of the loan. Depending on the money that remains available to us after making all the necessary expenses, we will be able to know which is the maximum quota that we will be able to pay.
Ratio Fee / Income : Banks always validate that the fee does not exceed 30% of your income or the income of the family group. So check that the maximum contribution you define complies with this rule!
It is important that you always leave a monthly money margin for savings or extras. That is to say that the installment of the loan does not use the totality of the money that remains available to you after making all the habitual payments of the month, since otherwise before any eventuality you are not going to have available money.
3 - Know your financial situation
Once you enter there you will be able to know what is your debt with each of the financial entities with which it operates as well as what is the credit rating.
1 - Normal Situation: clients who pay their obligations on a timely basis or with
less than 31 days.
2 -Low risk: clients who register occasional non-compliance, with delays of more than 31 to 90 days.
3 - Medium Risk: clients who show some inability to cancel their obligations,
with arrears of more than 90 to 180 days.
4 - High Risk: clients with arrears of more than 180 days up to one year.
5 - Irrecoverable: insolvent or bankrupt clients with little or no possibility of recovery.
or with arrears greater than one year.
It is important to know your financial situation because it is what banks verify when granting credit. If your situation is 1, it is probable that you will have no problems obtaining a loan, but if you are in one of the other situations, you must consider the option that the Bank will not grant you credit and you must evaluate other financing options.
Whether you want to get a loan of any kind or want to know the financial situation of a person or a company can consult the following link:
4-Analyze and compare. Look for 3 options to compare
If before buying a dress for our best friend's wedding we do a mega investigation, how can we not do the same to assume a payment commitment for a certain amount of time? The answer is easy because it's boring and we don't understand it. But here are some tips to make the research as simple as possible for you :)
a) Identify the data that allows you to compare all the options. How I told you in another post the interest rate is the price we have to pay for using someone else's money. And the rate that reflects all the necessary costs we must face to make the operation is the CFT (Total Financial Cost) So the first thing we have to do is identify the annual CFT with taxes for all the options we have available.
Important! Consult the CFT with taxes, i.e. the total financial cost with all expenses included, otherwise we won't be able to compare correctly!
b) Research and compare different interest rates. Now we need to know which is the CFT of the different banks with which we can make the operation.
c) Select 3 options and go to the nearest branch of the 3 banks you chose to know in detail the conditions of the loan. A typical mistake is to take out the loans in the same entity where we have our account, without first having analyzed other options. Today the procedures to register a savings bank in another bank are very simple, have no cost and thanks to it we could obtain a loan more "economical" or with a lower rate than in our usual bank. Simply go to the bank where we will consult and ask to see a commercial advisor or an account executive of the bank.
d) Define the term of the loan based on the maximum amount you could pay. It is important that you always compare the loans for the same period of time, since the interest rates change a lot depending on the duration of the operation. For example, a 36-month loan could not be compared to a 48-month loan, because by definition the longer it takes to repay the higher the rate, then the 48-month rate, although it may have a lower monthly payment, is likely to end up paying higher interest than in the 36-month rate.
e) Consult the form of delivery of the money. It often happens that there are certain administrative expenses involved in the operation, so that the money that is finally credited in the amount could be less than the money requested. It is important to know in order to contemplate if it is necessary to ask for more money considering these expenses.
f) Consult the conditions of early cancellation. In other words, if you wanted to cancel the loan before the end date, would you be charged the same interest? is there a penalty?
Partial or total cancellations can be made. Most banks have a 4% commission on the amount we are going to cancel. But this commission is much lower than the interest that we would pay so if we have the money, it is always preferable to cancel to shorten the term of the loan or reduce the amount of the monthly payment.
5-Identify the necessary requirements
In general today in most of the websites of all banks detail what documentation is necessary to apply for a loan, so you can check there, however it is important that when you go to make the consultation to the bank and take all the necessary documentation to validate with the account executive that is correct. Here are the usual requirements
- DNI (original and photocopy)
- No unfavorable track record in the financial system.
- Do not register maintenance debts.
- A Tax or service in our name to register the Savings Bank and/or Current Account.
If you work in a Dependency Relationship:
Salary Receipt for the last 3 months. In the case of people who have variable salaries (overtime, bonuses or commissions) they must present the last 12 salary receipts.
Minimum length of employment of 6 months or 1 year, depending on the entity.
If you are Independent:
- Minimum seniority of 1 year in AFIP.
- Cuit (original and photocopy)
- Certification of average monthly net income for the last year issued by a Certified Public Accountant and with a signature certified by the corresponding Professional Council.
- Last 3 payments of pension contributions (original and photocopies)
- According to the corresponding qualification, matriculation, municipal qualification or social contract.
If you are a Monotributor:
- Minimum seniority of 1 year in AFIP.
- In order to define your income, the maximum established for the tax category in which you are registered will be taken.
- Minimum of 6 months of registration in the category in which you are.
- Last 6 monotax payments (original and photocopies)
6-Idea a plan to be able to fulfill the payment of the quota
In order to be sure and calm to take a loan it is important to analyze previous to the confirmation of the operation that plan B we would have to execute in the case that our incomes diminish and we cannot face the payment of the monthly payment.
The fundamental thing is to think in what other way we could obtain the necessary money to confront the quota of the loan, although it is a super personal subject and each one knows in what is good and how it could solve it. The important thing is to keep it in mind. So here are some ideas :)
- Sell clothes you don't wear anymore. Today there are many vintage fairs or apps for which you can sell that clothing you no longer like or do not use and is in good condition. This way you can get an extra income ! I leave some links: El Galpón de Ropa, Renew your Dressing Room
- Evaluate the option of a Free Lance job. In the digital era there are new professions and new needs in the labor market, perhaps if you investigate you can collaborate in some project as a free lance, in addition to your usual work and thus ensure you always in extra income. He left them the Links: FreeLancer, Workana
- Create your own blog. We all have a passion, something we love. Well today very easily you can build your own website and start writing about the things you like so you can generate a community that values your content and wants to pay for it or you can receive some extra money for placing advertising on your blog. Here are some links to build your own page: Wordpress, Wix
- Evaluate the option of having an extra job on weekends. This can range from helping out at a bar to helping small entrepreneurs manage their finances, checking with your family or friends if they know of a part-time weekend job, or something similar.
- Start your own business. It can range from making flowerpots with succulents, to buying and selling necklaces, making cakes, puddings, office lunches, and so on. There are many options you just need to be attentive to our qualities and detect an unsatisfied need or an opportunity!
That's all the steps you have to take before getting a loan.
Now, do you want to know more about loans?
If so, here I leave a little more technical information for those who want to know how a loan works. Anyway remember that if you have any question you can write to me! :)
An important topic is to know the amortization system. Amortization is the financial process from which a debt is extinguished through periodic payments.
The installment of a loan will be composed by: Capital (Amortization) + Interest + Taxes. Therefore, the portion of capital that we are going to pay every month is what is known as amortization, since when the capital is paid, the debt is extinguished (shrinking) in each installment.
Now, there are 3 types of amortization (French system, German and American) but the vast majority of operations and banks today use the French system, so that's why they have to know how it works.
The French amortization system calculates interest on the balance of principal owed, then the first months of the loan we will pay more interest and less principal. While the last months of the loan we will pay more capital and less interest.
Some conclusions are:
- The monthly installment is composed of : Capital (amortization) + Interest + Taxes
- The balance of the debt decreases every month depending on the capital I pay in each installment.
- The capital I pay is increasing every month. While interest is decreasing.
- The tax is always calculated on interest, i.e. (VAT on interest for the month). It would be 21% of the interest.
- The quota is decreasing as well as the interest.