Steps to take when applying for a consumer loan
If you need to finance a one-off expense, perhaps to take a special course or to refurbish your kitchen, one option is to arrange a consumer loan. It is important to get full information before you apply and to weigh up different offers using comparison tools and the banks’ own websites. Also, make sure that you are provided with the Standard European Consumer Credit Information and all the clear explanations you need. Once you’ve made up your mind, the bank will need the following documentation for a formal application:
- Proof of identity
- Proof of income (e.g. recent payslips or pension receipts)
- Authorisation to check your information in the Central Credit Register (CCR). For more information on the CCR, click here: https://clientebancario.bde.es/pcb/en/menu-horizontal/productosservici/relacionados/cirbe/
- Depending on the loan amount, they may also ask about your dependants, rent and any other fixed expenses to determine how much disposable income you will have to pay down the new debt.
Remember, banks must provide you with pre-contractual information, setting out the characteristics of the loan, far enough in advance so that you can take it home and read it, compare it with other offers and consider whether the loan suits your needs before signing the contract.
When you check the conditions offered, pay particular attention to the following:
- The period associated with the offered interest rate (for instance, 1% monthly is far more than 8% annually).
- To avoid confusion over interest rates, compare the APR of the offers that you are considering, since this factors in all transaction costs and reflects the real price of the loan.
- Check whether there is an arrangement fee.
- And what happens if your financial position changes down the line and you decide to repay the loan early? Find out what charges are payable in the event of partial or full early repayment.
Check whether arranging your loan or credit is contingent on the purchase of any additional product, such as a card or insurance policy. If so, request the pre-contractual information for those products, weigh up their costs and consider whether the overall offer is in your interest.
And lastly, if you change your mind, you have a 14-calendar day cooling off period in which you can cancel the loan free of charge. You simply have to return the borrowed capital plus any interest accrued up to that time.
For more information on consumer finance, click the following links: