Lending in the modern world is so well developed that most large purchases are made through a bank loan. Almost anyone who meets the bank’s minimum requirements can get a loan. The most common type of loan today is a consumer loan.
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A consumer loan is a type of bank loan provided for the purchase of goods, services and cash for various needs. The Americans were the first to develop this business, offering the population installment plans at fairly high interest rates. Then other countries picked up the idea, but only well-off people who were ready to provide certificates of income could receive a loan.
With the collapse of the USSR and the onset of default, lending almost completely disappeared, and there was no trust in borrowers. Only private organizations were willing to take risks by issuing loans at huge interest rates.
About 10 years ago, lending gained momentum again, and new banks began to appear offering loans on favorable terms.
Now, to receive a loan, many companies require only a passport, recording the rest of the information from words without documentary evidence.
Consumer lending is divided into several types, depending on the purpose of obtaining funds, the method of financing and repayment of the loan.
Let's look at the most common types of loans, most often found in modern banks:
Each bank has certain requirements for borrowers:
Many bank requirements can be circumvented, but only by receiving a small amount. Most of the information is recorded from the words of the consumer, but you should not expect loyal conditions for this. The less confidence in the borrower, the higher the interest rate.
Recently, banking organizations meticulously check each borrower for the absence of late payments. But each borrower has the right to refuse to review the credit history (not to sign a document confirming consent). But banks do not approve of this behavior and may simply refuse to issue a loan.
There is one more requirement for the borrower, which few people know about. When applying for a loan, you need to look neat and clean. If bank employees do not like the consumer’s appearance, they will indicate this point in the application form and the loan will be denied.
The list of documents required to apply for a consumer loan varies depending on the requirements of the bank and the type of loan. As a rule, the higher the loan amount, the more documents you will have to provide. For a loan under the express program, you only need a passport and any document of your choice (driver’s license, pension certificate, student card, pass).
If you need a loan at lower interest rates, you will have to prepare an extended package of documents:
If a guarantor is involved to obtain a loan, then his documents confirming his level of income and official employment will be required.
Do you want to know, ? We have the most complete information on this issue.
Mortgages for public sector employees are a profitable way for doctors, teachers and military personnel to get housing. you can find out everything about the requirements for borrowers, interest rates and required documents.
Today, Sberbank of Russia offers the lowest interest rates on loans. You can get a loan without collateral under 18-22% per annum. If a consumer receives wages on a Sberbank deposit card, then he is entitled to very favorable lending conditions.
However, for other borrowers it is quite problematic to take out a loan or purchase expensive property through Sberbank.
A full package of documents, registration of collateral and surety will be required. But even in this case, borrowers are increasingly hearing loan refusals.
The Bank of Moscow is ready to provide a loan from 19 to 35% per annum upon receipt of a complete package of documents. Conditions are more favorable at high income levels. The Bank of Moscow is more willing to provide targeted loans for the purchase of goods and services.
The most loyal conditions in Home Credit, Rosbank, Trust and Russian Standard. Almost anyone who meets the age category and has a positive credit history can get a loan. However, the interest rate increases to 56% per annum.
The optimal balance of conditions and interest rates is offered by OTP Bank, Otkritie and Renaissance. Targeted and non-targeted loans can be obtained at 30% per annum with the provision of an average package of documents (passport and proof of income).
The interest rate depends on the age of the borrower, his marital status, the purpose and term of the loan, the amount of income and the documents that he is willing to provide to the bank.
Loan repayment can be carried out in several ways:
The loan must be repaid strictly on time, preferably a week before the designated date, to avoid delays. Payment may be delayed for reasons beyond the control of the bank and consumer, as well as on holidays.
If funds arrive in the account even one day later than the date specified in the agreement, the borrower is charged a fine, which he must repay before the next payment date. The bank sets the amount of the fine independently, but it rarely exceeds 1,000 rubles.
When receiving a loan, banks almost always charge hidden fees, which increase the amount of overpayment. Despite the promises of credit institutions about low interest rates, the consumer receives a loan at the highest rates. And the fact is that when calculating payments, hidden commissions are applied, which include insurance, payment for opening and maintaining an account, and so on.
The result is the effective interest rate, which is the rate that includes all hidden fees and additional charges. All detailed information is written down in the contract, so you must read it carefully before signing.
Are you interested in credit cards with a grace period for cash withdrawals? Home Credit Bank has a lot of tempting offers in this area. More details in.
A consumer cash loan is one of the types of lending in which the loan is issued in cash in cash. Some banks transfer funds to a card, which can be used to pay for services and goods.
One of the most popular types of credit in Russia is consumer credit. About 60% of Russians use consumer lending, which is gaining popularity among all segments of the population every year.
The volumes of consumer lending are so high that they cover the entire territory of Russia and the CIS countries. Today, banks are actively developing this segment, as it is the most advantageous and profitable direction for financial and credit institutions.
Despite the fact that banks actively attract borrowers, there are certain procedures for obtaining a loan. Many banks set an age limit on issuing consumer loans, which allows them to take out loans only to those people who are highly likely to repay the bank by fulfilling all the terms of the loan agreement. In addition, banks require the borrower to have a work experience of at least three months. Some financial institutions may require a foreign passport in order to check whether you have been abroad for the last six months.
Problems of consumer lending
The main problem of consumer lending for the borrower is the high interest rate. As you know, the pleasure of a purchase quickly wears off and you are left with a loan that must be repaid over several months or years. Many people make a hasty decision and apply for a loan, after which they have a problem repaying their debt to the bank. This development of events is one of the main and most serious problems of consumer lending. Therefore, a potential borrower should think carefully about everything before applying for a loan.
The widespread use and popularity of consumer loans is due to the ease of obtaining them, which is usually associated with a small loan amount and a relatively short duration. That is why the number of such loans does not decrease even during the financial crisis, and many banks make retail consumer lending the main focus of their work. However, not all borrowers take full advantage of the benefits of loans for consumer needs, so it would be logical to consider the issue in more detail.
About consumer loans
A consumer loan usually refers to a loan that is issued primarily to individuals for the purchase of any consumer goods or services. By and large, even a mortgage or car loan are a variety of such loans, however, they are generally considered to be separate types of lending. The main features of consumer loans are their short duration, which rarely exceeds 1.5-2 years, as well as their insignificant amount compared to the already mentioned mortgage and car loan.
Quite often, a consumer loan is issued in the form of installment payment, when the interest on the loan is not actually allocated, being included in the price of the product. In this case, the loan, in fact, is issued directly by the retail outlet, and not by the bank, and is not a full-fledged loan, since there are no formal signs of it in the form of interest on the use of borrowed funds and the conclusion of a loan agreement.
Types of loans
Currently, there are several types of consumer loans, which can be classified according to their various parameters:
- Non-target. These loans are issued in cash or on a credit card. Important features of such loans are a higher interest rate compared to the target ones, as well as a smaller loan size. Despite this, according to many financial analysts and banking services market specialists, this type of consumer loans is the most common;
- Target. Issued by a bank for the purchase of a specific product or service. Often, registration takes place directly in the store, where the borrower has already selected the purchase he needs. Often this type of loan is used to pay for various services, for example, treatment or a tourist trip;
- Express loan. A relatively new type of lending, which is provided in most cases online, essentially serving as an improved and more profitable version of microloans for the client. The main features of such loans are a high interest rate and a small loan size;
- Credit bank card. This option for obtaining a loan, when borrowed funds are transferred to the client’s plastic card, is rapidly gaining popularity. The reasons for this are the simplicity, security and convenience of the procedure for crediting funds, combined with the constantly increasing number of cards in the hands of individuals.
Of course, in addition to those described, there are many other types of consumer loans, however, the most common and often used in practice are listed above.
Requirements for the borrower
In most cases, banks have fairly flexible requirements for potential recipients of consumer loans. This is explained by the small size and short duration of the loan, which is the main characteristic feature of such loans (if we consider mortgages and car loans as separate types of loans). Another factor that allows credit institutions to reduce the level of requirements for consumer loans is a higher interest rate, which also compensates for part of the risks of such financial transactions for banks.
As a result, the usual conditions for approval of a consumer loan are:
- Russian citizenship and age of majority of the borrower;
- positive credit history;
- having a permanent source of income (except for loans for very small purchases).
Quite often, banks’ requirements for potential clients applying for a consumer loan are limited to meeting the three conditions listed above.
Until recently, applying for a loan for consumer needs required a mandatory visit to a bank or retail outlet. At the same time, the procedure for filling out and submitting the necessary documents was quite quick and simple, which is not surprising, given the high level of competition in this market segment. The client simply would not work with a bank that makes excessive demands or is slow in processing the paperwork necessary to receive funds.
However, in the last 3-4 years, an increasing number of applications for consumer loans have been submitted online via the Internet. This is explained not only by the convenience of such a procedure for the client, but also by the serious growth in online trading volumes. As a result, the purchase of a particular product can take place almost entirely online: from selecting it, continuing with submitting an online application and receiving a loan, to making a payment and then ordering delivery of the product.
Which banks provide consumer loans?
Currently, almost all credit organizations serving individuals are engaged in issuing consumer loans. Some of the largest and most famous such financial institutions include: Sberbank, VTB 24, Sovcombank, Tinkoff Bank, Alfa-Bank, Raiffeisenbank and many others. It is obvious that the presence of such a large number of active participants in this market segment leads to increased competition, which has a positive effect on the favorable conditions of consumer lending for clients.
Interest rates on consumer loans
One of the most important parameters of any loan is the interest rate. Obviously, it can fluctuate quite a lot depending on the type of loan issued and the organization issuing it. At the same time, it is important to understand that often the declared interest rate differs markedly from the real one, taking into account all additional commissions and payments to the borrower associated with obtaining a loan for personal needs.
Another option for lowering the interest rate is to hide it in the cost of the product. That is why, when choosing a suitable loan, you should carefully study the terms of the loan, paying especially close attention to hidden interest and fees, as well as prices for similar products in other stores.
Loans with low interest rates
In 2017, among the most attractive commercial offers in terms of interest rates are the terms of consumer lending established by the following banks: Renaissance Credit, OTP-Bank, Sberbank, Orient Express Bank, Alfa-Bank and VTB 24. They offer a loan for consumer needs at 12.9% -16% per annum. Of course, this is the declared level of the interest rate, therefore, for the reasons described above, when choosing a loan and bank, it is necessary to find out all the other conditions for obtaining a loan.
Pros and cons of loans for consumer needs
Like any other banking product, loans for consumer needs have both very obvious advantages and certain disadvantages. The first include:
- low requirements for borrowers from credit institutions;
- obtaining a product or service, the acquisition of which would be difficult without borrowing funds;
- the ability to submit online applications, several at the same time, to various banks;
- quick consideration of the application;
- the ability to repay the debt early, usually without penalties.
The disadvantages of consumer lending include:
- relatively high interest rates on such loans;
- increase in the final cost of goods due to interest paid;
- an increase in financial burden, which especially negatively affects the borrower during a crisis;
- the need to pay penalties for late loan payments.
Refinancing and refinancing of consumer loans
A large number of consumer loans issued before the onset of the next crisis has led to the fact that quite often today one borrower has several loans at once, the payments on which constitute a significant share of his income. Naturally, this situation has led to a noticeable increase in the level of non-payments and delays. As a result, refinancing and on-lending of consumer loans have recently become extremely popular and in demand in the market for banking services.
The purpose of such actions is the borrower’s desire to obtain a loan on new, more favorable terms, the funds of which are used to pay off old consumer loans. The consequence of refinancing is a reduction in the financial burden on the borrower and restoration of his solvency. Refinancing services are provided today by almost all major banks, including Sberbank, Rosselkhozbank, VTB 24, etc.
Consumer loan without guarantors and certificates
A fairly large number of banks offer the opportunity to obtain a consumer loan without providing income certificates or issuing surety agreements. Such credit institutions include Tinkoff Bank, OTP-Bank, Sovcombank, etc. However, it is necessary to understand that the lack of collateral leads to serious restrictions on the loan amount and an increase in the interest rate.
Is it possible to get a loan without income and collateral?
Listed above are several banks that issue consumer loans without requiring clients to meet income requirements or to provide security for the loan. Of course, in this case we can only talk about small amounts and a short loan period. Another option for obtaining funds for consumer needs is to contact various microfinance organizations, whose requirements for potential borrowers are much less stringent than those imposed by banks. However, in this case you will have to pay a much higher interest on the loan, sometimes reaching 1-2% per day.
For how many years can I take out a loan for consumer needs?
The most common duration of a consumer loan is 6-12 months. In some cases, its period increases to 2 years if we are talking about a more serious purchase. A long duration of a personal loan is quite rare in practice.
Is it possible to take out a cash loan?
Today, there are two main options for obtaining borrowed funds from a consumer loan. The first of them involves crediting money to a card that the client already has or has been specially made for this purpose. This method has recently become increasingly popular due to its convenience and safety for the borrower.
The second option involves receiving cash directly from the bank's cash desk. Until recently it was the most popular, however, today it is used less and less. This is due to several reasons: the cash withdrawal fee, which is established in many banks, and the inconvenience of carrying a large amount of money with you.
How is a consumer loan repaid?
Today, almost all banks provide customers with the opportunity to choose from several repayment options:
- using terminals or ATMs;
- postal transfer;
- transferring funds from a card using Internet banking;
- transfer of funds from electronic wallets, etc.
Early loan repayment
Repaying the debt to the bank earlier than the scheduled date allows the borrower to save some money by reducing the overpayment on the loan. At the same time, a credit institution today, in accordance with current legislation, does not have the right to charge any penalties for early repayment of a loan, which was often practiced in the past.
Of the existing types of credit, which are widely heard today thanks to television, radio and various print media (commercial, international, banking, government, pawnshop, etc.), perhaps the most famous is a consumer loan.
It is with its help that we satisfy our current needs. Everything that we, for one reason or another, cannot afford to buy with our personal funds becomes available to us with the help of consumer lending: from a microloan for urgent needs, borrowing money for repairs or a trip to the sea, to buying a smartphone, furniture, or a car. , apartments, etc.
Does the applicant (or an existing borrower) have sufficient knowledge about the service he is receiving? Refresh your memory about the last time you received a consumer loan, and whether you read the agreement (from cover to cover). Maybe some conditions seemed unacceptable to you, or you were so happy about the bank’s positive decision that you were ready to sign any papers, including insurance, if only they would give you the coveted loan.
Or maybe it’s time to slow down a little and finally figure out what you’re dealing with. Understand that consumer lending is fully regulated by law, according to which not only the lender, but also the borrower has rights. And knowing your rights, you can feel much more confident and not succumb to the desire (albeit veiled) of the creditor to deceive his client-applicant. That's what we'll talk about in this article.
Consumer credit (loan). What it is?
A consumer loan (loan) is a loan issued to the population and intended to satisfy their consumer needs (payment of any personal expenses). To be more precise, this is one of the loan options in which a thing (in our case, money) is issued for temporary use on the basis of an agreement, and with the condition of paying interest and repayment. A loan, unlike a loan, cannot be interest-free (more about).
An item or service that is purchased with borrowed money is called an object of consumer lending.
Well, probably, the truth is somewhere in the middle, and we will not go to extremes, but will simply study the topic more carefully, because consumer lending is really very convenient, and it is unlikely that we will be able to abandon it in the near and distant future.
We will talk about the pros and cons of consumer lending later, but for now, a very important remark.
The most important law that we will constantly refer to in the article is Federal Law No. 353-FZ “On Consumer Credit (Loan),” which fully regulates the relationship between the lender and the borrower, and it would not hurt to have at least a superficial understanding of it every borrower.
Principles of consumer lending
Any loans, including consumer loans, are issued subject to mandatory compliance with a number of principles:
1. Urgency. Means that the loan is issued for a certain period established by the loan agreement.
2. Payment. Loans are issued for a reason, but for a fee (reimbursable). This is the same interest (bank fee) that is charged to the borrower for the entire term of the loan agreement. This also includes all kinds of commissions and fees that the borrower pays in the course of fulfilling loan obligations to the lender. Money is the same product for the use of which the borrower pays the bank.
3. Returnability. The loan must be repaid on the terms stipulated in the loan agreement, even if the deadline established by the agreement is violated.
4. Purpose. The client is given a loan for certain purposes, some of which are combined with the phrase “urgent needs.” But even if the purpose for which the funds were requested is not specified in the loan agreement (non-targeted nature of lending), it still exists. Let it be a well-deserved vacation or new boots - in any case, this is the goal.
5. Security. The essence of the principle is that when receiving a loan, the client provides the bank with a guarantee of its repayment on time. The collateral can be collateral, third party guarantees or risk insurance. Even if collateral is not provided for in the contract, the financial institution is insured by checking the applicant’s solvency (requesting a credit history, scoring, etc.)
6. Differentiation. The essence of the principle is an individual approach to each client. The main terms of the transaction will depend on the identity of the borrower, his earnings, credit history, loan term and membership in one of the preferential categories (salary client, pensioner, etc.)
If these principles are ignored, the relationship between the parties can no longer be called credit. The pillars on which consumer lending rests are the first three principles.
Types of consumer loans
There are many criteria for classifying consumer loans:
1. Differences in loans by subject of the credit transaction:
By type of creditor. They are divided into bank loans, provided exclusively by banks, and non-bank loans, which are issued by other financial organizations: credit cooperatives, microfinance organizations, pawnshops, financial groups, trade organizations, rental points, etc.
By type of borrower. Such loans are issued to the following population groups:
- to all segments of the population without division into separate categories;
- various social (for example, military);
- certain age groups (for example, pensioners);
- groups of borrowers differing in creditworthiness (income level, credit load, and other solvency factors);
- VIP clients (with high income and social status);
- young families;
- students.
2. According to the terms of provision:
One-time. It is assumed that the entire loan amount will be issued at once, without breaking it into parts and without the possibility of additional borrowing within the framework of the concluded agreement.
Renewable. What we mean here is renewable. Such a loan is also called a revolving loan, which is provided to the borrower within the limits of the repayment period established by the agreement at any time, automatically, without additional negotiations between the lender and the borrower. This is how credit cards work. That is, as soon as part of the loan taken is repaid, the available credit limit immediately increases by the same amount.
3. By loan terms:
- Short-term (loans up to 1 year - for urgent needs);
- Medium-term (up to 5 years, for example, car loans);
- Long-term (over 5 years, for example, mortgage).
4. According to the form of issue:
Commodity. It is used in relation to targeted loans, most often when selling goods on credit. A striking example of this is in chain stores selling household appliances, when the entire loan amount is transferred to the seller by a partner bank non-cash, so that the client does not even hold the money in his hands, and the buyer’s obligations arise before the bank.
Cash loan. The borrower receives money at the bank’s cash desk or by bank transfer to his bank card (example –)
7. By method of repayment:
Differentiated repayment scheme. It is also called classic. Each payment contains the same part of the “loan body”, which is calculated by dividing the total amount of the loan body by the number of months to be repaid. To this part is added the interest accrued on the loan balance, which decreases evenly every month. As a result, the first payment will be the largest, and the last payment will be the smallest. The overpayment under this scheme is usually lower (compared to the most popular today - the annuity repayment scheme). It is more profitable to repay a loan early with this repayment scheme due to the principle of calculating interest payments.
Annuity scheme. Under this scheme, every month the borrower pays the same amount, which initially consists of the “lion’s share” of the interest payment and a very small share of the debt. It turns out that the borrower actually pays interest to the bank for the first half of the loan, and then repays the loan body. The overpayment on such a loan is higher (for more details on the comparison and the essence of repayment schemes, see), but nevertheless you can apply.
Paying off credit card debt. Since borrowing funds while using a credit card is also a type of consumer lending, it is impossible to ignore the ways of repaying debt on this unique modern financial instrument. The bank's only requirement for the card holder is to pay every month, which is usually equal to 5% to 8% of the principal amount (plus accrued interest for the billing period). That is, the holder himself decides how much he will pay on the next payment date. This is both good and bad. The good thing is that the borrower does not need to agree with the bank on the exact repayment amount, plus he can repay the loan ahead of schedule at any time. The downside is that the process of repayment with minimal payments alone can last for an indefinite period of time, which will affect the total cost of the loan, because each time you will have to pay interest.
8. By repayment method:
With one-time repayment. These are usually short-term loans. Example - in microfinance organizations;
With installment (deferred) payment. This is a typical repayment scheme for most consumer loans with debt repayment in installments at time intervals established by the agreement. You can learn more about the concept of installment plans in. There is often confusion between the terms installment plan and deferment. They are used in the same sense, although their meaning is somewhat different (details).
Terms of the consumer loan agreement: registration and receipt
According to Law No. 353-FZ, a consumer loan agreement consists of general conditions and individual conditions. The general conditions must be publicly available (for example, on a website), and they serve as pre-contractual information to the borrower. This way we can find out the conditions for receipt and return, frequency of payments, range of rates, responsibility of the borrower (amount of penalty), i.e. that information on which the applicant can make a decision about submitting an application to a particular financial institution.
This information is provided to the applicant free of charge (Article 5, paragraph 5 of the law), but please note: copies of documents containing this information must be provided to the borrower upon his request free of charge or for a fee not exceeding the cost of their production. That is, if you go to the bank and demand to provide 10 sheets of general conditions, then the bank has the right to charge you a small fee, including the cost of paper, toner, etc.
Individual terms contain more specific information - the exact rate, loan term, amount, size and frequency of payments, etc. The individual terms of a consumer credit (loan) agreement are printed in a clearly readable font, starting from the first page of the agreement in the form of a table, the form of which is established by a regulatory act of the Bank of Russia.
Please note that according to paragraph 7 of Article 5, the lender cannot require the borrower to pay payments under the concluded agreement that are not specified in the individual terms of such agreement.
By the way, are you aware that the law (Article 5, paragraph 8) obliges the lender to provide the borrower with the following information for a loan amount of 100 thousand rubles or more. If the total amount of payments for 1 year for all credit obligations the applicant has exceeds 50% of his annual income, then he faces the risk of failure to fulfill his obligations under the consumer credit (loan) agreement and the application of penalties to him. This is about the issue of imposing loans. The state, as you can see, warns the borrower in every possible way about possible danger, and also issues various reminders. Below is an example of such a memo compiled by the Central Bank of the Russian Federation, the main financial regulator.
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The legal requirement to notify (Article 5, paragraph 15) the creditor of changes in contact information is by no means an empty phrase. Many are in no hurry to share their changed contacts, but in this case the lender will not be able to notify the borrower in a timely manner about changes in conditions or provide other useful information.
Let's move on. Article 17, paragraph 5 tells us that if the individual terms of the agreement provide for the lender to open a bank account for the borrower, then all operations on such an account related to the fulfillment of obligations under the agreement, including opening an account, issuing to the borrower and crediting to the borrower’s account a consumer loan (loan ), must be carried out by the lender free of charge. This clause makes it illegal for banks to force a borrower to pay, for example, for opening an account.
And here is an equally interesting paragraph 19, which talks about preventing the creditor from collecting remuneration for the performance of duties assigned to him by regulatory legal acts of the Russian Federation, as well as for services, providing which the creditor acts exclusively in his own interests and as a result of the provision of which a separate property is not created benefit for the borrower. It’s a little hard to understand, but in a nutshell, the lender should not take money for what he is obliged to do by law, look, for example, at the article about learning something new and interesting for yourself.
At the stage of applying for a loan and signing an agreement, the borrower is faced with such a concept as (PSC), which, in fact, should tell a lot about the total costs awaiting the borrower. Banks are required to disclose this most important characteristic of loan requirements. It is designed to estimate the cost of borrowed funds () not only by the interest rate, but also taking into account other payments by the borrower provided for by the terms of the agreement. This is a rather vague concept and is unlikely to tell the borrower anything, so perhaps the best way to estimate your approximate expenses is to look at the total overpayment on the loan in the payment schedule. Although if you enter all the necessary loan parameters and PSC into a loan calculator on some trustworthy website, you will undoubtedly get a more accurate estimate of the total overpayment.
Requirements for borrowers
Let's say a few words about the requirements of credit institutions for borrowers - when the chances of loan approval are high and when they are reduced to zero. They may vary from bank to bank, but in general they can be divided into several standard blocks:
1. Citizenship. As a rule, there are only a few banks that issue loans to non-residents. To receive a loan you need a Russian passport.
2. Age restrictions. Each bank sets the possible minimum and maximum independently. The bulk of loans are issued after the age of majority, but before retirement age.
3. Employment and work experience. Only some dubious MFO or pawnshop can issue a loan to an unemployed citizen LINK. Other financial structures will definitely check the availability of work experience (in total, at least six months) and actual employment at the time of filing the application.
4. Credit history (CI). A positive “credit history” always raises the client’s profile in the eyes of the bank, while past loan arrears may even serve as a reason for refusal. Getting a loan with a bad CI is very difficult and expensive (to reduce the level of risk, the lender in some cases may raise the interest rate), but, fortunately, . Unpaid delinquent debt can put a damper on your immediate credit future.
5. Amount of income. Bank managers are required to calculate the client’s solvency and compare the obtained values with the amount of the requested loan. Without income documents, only non-banking structures lend. This also includes such an important indicator as the credit load - the borrower’s ability to fulfill current obligations to creditors.
6. Geography of registration. You can easily obtain a loan only in the region in which the applicant is officially registered. In other areas this is either difficult or completely impossible to do.
All requirements for borrowers are mandatory. They can be partially bypassed only by regular clients of credit institutions or borrowers of non-banking organizations, where the bulk of the information is recorded from the client’s words (and is not actually verified).
Conditions for issuing loans
To apply for a consumer loan, you will need to bring a package of documents, the composition of which is determined by each credit institution.
When lending to non-bank institutions (MFOs, pawnshops, consumer credit cooperatives), only a passport and, in some cases, any other document are required. This could be a foreign passport, driver's license, student ID, pension card, etc. With such a minimum set of documents, the rate will naturally be high.
You can reduce the interest rate only by taking out a loan from a bank. The interest rates there are much lower, but the list of documents is longer. Here you will have to confirm the amount of your income with the appropriate certificate (2-NDFL) and permanent employment with a copy of your work book or employment contract. In addition, you may need a military ID (for persons liable for military service) or a pension certificate (when lending under a pension program). And if you take out a car loan or a loan secured by real estate, prepare a PTS, CASCO policy, compulsory motor liability insurance or a title document for the property pledged as collateral, depending on the type of loan.
For more information about what documents are required to conclude an agreement, see.
Interest rates also depend on the policy of the specific institution and the chosen loan product. At the time of writing, their minimum threshold is fixed at 14-15%, but what the maximum will be is a big question. In some microfinance organizations, rates are indicated as interest per day; for such predatory loans they can reach 700% per annum. In addition, do not forget about the various additional services, fees and commissions that financial institutions try (and often successfully) impose.
At the same time, large banks practice all kinds of promotions and loyalty programs for existing and new clients. They especially apply to those who receive wages into bank accounts, or who are (were) bona fide borrowers of the bank.
Debt repayment
Here it is necessary to start with the fact that the law (Article 5, paragraph 20) sets a certain order of repayment of the borrower’s debt to the creditor. The amount of the next payment repays the debt under the agreement in the following order:
- interest debt;
- principal debt;
- penalty in the amount determined by this law (see below);
- interest accrued for the current payment period;
- the amount of the principal debt (loan body) for the current payment period;
- other payments provided for by the legislation of the Russian Federation or the agreement.
As you can see, priority is given to debt not paid on time and accrued penalties as a result of late payments on the loan. A person experiencing financial problems often cannot afford to pay the monthly payment in accordance with the contract, and only pays part of the payment (it's good that at least something else is paid!). Accordingly, a debt of interest and principal is formed and the next payment is spent to pay off this debt. It turns out to be a vicious circle, since it turns out that the principal debt does not decrease, and the borrower spends his money to pay off overdue debt and penalties, i.e. he begins to slide deeper and deeper into a hole of debt.
Definitely, the fault is not with the state, which allows banks to issue loans, and not with the banks themselves, which “imposes” them, but, strangely enough, with the people themselves - they simply are not aware of their actions. They hope for chance and end up with serious problems due to their complete financial illiteracy. Only recently have they begun to talk about increasing the level of financial literacy at the highest level, introducing relevant subjects into the school curriculum and educating the population in every possible way. But this is not enough, a person must want it himself, and not under pressure, and if this does not happen, then the majority of the population will never get out of “credit bondage.”
We got a little distracted, but now let's continue. For failure to fulfill obligations to repay the loan, the borrower is punished with a penalty (Article 5, paragraph 21), which cannot exceed 20% per annum if interest under the agreement for the corresponding period of violation of obligations continues to accrue, and 0.1% of the amount of overdue debt for each day of violation, if interest under the contract for the period of delay is not accrued.
The bank may provide many repayment methods, but one of them (Article 5, paragraph 22) must be free in the locality where the borrower received (an offer to conclude an agreement) or at the location specified in the agreement.
With the development of the Internet and cellular communications, many ways to repay a loan have appeared:
- payment from an electronic wallet;
- depositing cash through the bank's payment terminal and at the cash desk;
- transferring money from a plastic card directly at an ATM (provided that it supports such a function) or in online banking;
- making a payment through, which supports the loan payment function, etc.
If possible, you should use repayment methods without commission, and do not delay payment until the last minute - depending on the chosen method, the money can take from 1 to 5 business days.
Important! Any closure of a consumer loan must end with receipt of it, and you can read about the remaining nuances of this important procedure in.
Early repayment
The law gives the borrower an unconditional right (Article 11) to early repayment of a consumer loan. The borrower may, without prior notice to the lender, repay the entire loan amount ahead of schedule within 14 calendar days from the date of receipt, with payment of interest for the actual loan period. And for a targeted loan (clause 3, article 11), the same can be done within thirty days from the date of receipt of the loan, and you can return either the entire amount or part of it.
And paragraph 4 of the same article gives the borrower the right to return to the creditor early the entire loan amount or part thereof with advance notice at least 30 calendar days before the expected day of return of funds. Methods of notification must be provided for in the loan agreement.
You can find out about the rest of the intricacies of early repayment in, in which we described all the nuances of Article 11 of the Law on Consumer Lending and gave detailed comments. Definitely worth considering!
Insurance
This is a very exciting topic, since banks often persistently impose, perhaps, the most popular additional service -. The borrower may encounter two main cases of this “popularly loved” service.
The first case is that the client is obliged to insure the collateral (for example, with a mortgage) or his life (this obligation is imposed on him by law), but the question arises about insurance in a company actively offered by the bank itself (which is part of a common group of companies with it), or from a third party insurer. What does the law tell us in this case?
The lender is obliged to provide the borrower with a consumer loan on the same terms (amount, repayment period of the consumer loan (loan) and interest rate) if the borrower has independently insured his life, health or other insurable interest in favor of the lender with an insurer that meets the criteria established by the lender in accordance with the requirements of the legislation of the Russian Federation (Article 7, paragraph 10).
Thus, the borrower has the right to choose any insurance company that meets the lender's criteria. And in this case, the lending conditions do not change.
The second case is that if the law does not provide for the obligatory conclusion of an insurance contract by the borrower, then the lender is obliged to offer the borrower an alternative option for a consumer loan on comparable terms (amount and repayment period of the consumer loan) without the mandatory conclusion of an insurance contract (same paragraph 10). Here we see that we have every right to refuse insurance, and the lender cannot refuse to provide us with a loan (details in the article:). But, please note, he can change the interest rate on it, since nothing is stated in the law about the fact that it should remain the same.
In paragraph 11 of the same article we see that if the borrower refuses to insure, despite the presence of this requirement in the contract, then the bank has the right to increase the interest rate on an already issued loan. And if the borrower fails to fulfill the insurance obligation (clause 12, article 7), the lender has the right to demand full early repayment of the loan. The same requirement will be legal in the event of a violation by the borrower (clause 13, Article 7) of the obligation to use the loan for the intended purpose, provided with the condition that the funds received are used for certain purposes. Keep this in mind!
Also, any borrower should keep in mind such a term as (the legal possibility of refusing insurance within a certain time from the date of its issue) and be aware of the possibility. And we invite our numerous clients of Sberbank to familiarize themselves with.
If you have difficulties repaying the loan
Anything can happen in life, and the borrower may violate his obligations to the bank to repay the consumer loan taken out. If the delay is not significant, then there is no need to grieve, the main thing is to try to get out of the situation. Read and draw conclusions.
In case of serious violation, banks may take more serious measures than periodic SMS mentions or warning calls. They can come to the aid of a credit institution, or, alternatively, the bank can assign the right to claim the loan under.
The collector today is no longer such a terrible beast as before, and the activities of collection organizations began to be regulated in 2016. It specifies the requirements for collection agencies and the restrictions imposed on communication with the debtor as part of activities to recover overdue debts.
And if collectors exceed the powers given to them by law, then the debtor must know.
How else can a debtor help himself in a difficult situation? You can try to contact the bank with a request for or repay an existing loan at the expense of another with more favorable lending conditions (). The basic rule of the borrower is not to hide from the lender and be sure to inform him about possible problems and expected delays!
And finally, we should not forget about the possibility of becoming a bankrupt, but it is better not to bring it to this point, but to try to settle relations with the bank without government intervention.
Customer credit. Advantages and disadvantages
The negative aspects of consumer lending are obvious:
- the interest on the loan will invariably increase the cost of the product or service;
- the loan period is much longer than the time period during which a person experiences pleasure from the purchase, and the reality that replaces it can drive depression (in other words, the debt will hang like an anchor around the neck);
- the risk of overpaying on a loan, which always arises due to ignorance and inattention - a poorly read loan agreement and misunderstanding of the loan terms increases the chances of overpaying more than it seemed at first;
- impulsiveness of purchases caused by the availability of borrowed money;
- The suddenly deteriorating financial condition of the borrower can lead him into a debt hole from which it is not easy to climb out.
And psychologically, being a debtor is not easy, especially if the loan is taken out for a long enough period. Debt bondage, which has no end in sight yet, is not a pleasant state.
Consumer lending also has undoubted advantages:
1. The product may become significantly more expensive in the future. There is no need to tell you how our prices are rising. In such a situation, a loan with its interest may be more profitable than saving money for the necessary purchase. In Soviet times, this could be saved for years and bought for the same money, but our reality today is, alas, not the case.
2. Things we need may disappear from retail sale. After all, we are constantly updating and improving something, so there is a high risk that in a year or two you will no longer find the very thing you wanted to buy. And a newfangled model with a bunch of additional functions is not always what you want.
3. We get the thing we need for use here and now. Spending the entire amount at once on the same refrigerator is not always easy and very significant. But paying off the loan in small pieces over the course of a year is quite an option. Money leaves the family budget little by little and somehow not very noticeably, but we are already using the thing.
4. Possibility to take out a trade loan. To purchase the same household appliances, it is not necessary to visit financial institutions, collect documents, and then wait for a decision. All you need to do is select the product in the store and apply for credit on the spot.
And in conclusion, I would like to remind you that a loan is beneficial only if it will generate profit in the future. This is borrowing to develop your own business or invest in yourself (study, treatment, mortgage, etc.). Otherwise, it is unjustified and unprofitable from the point of view of personal finance management. Funds need to be spent wisely and wisely, without giving in to momentary desires.
January 2019
Today, lending in our country is a fairly popular banking service. Credit organizations offer their clients loans for various purposes - buying a home, car, and so on. Consumer loans are in greatest demand. To choose the optimal loan program, you need to study the conditions for issuing such loans, otherwise you can end up in a debt trap. Next we will explain in detail what a consumer loan means and what is necessary to obtain it.
Definition
A consumer loan is a loan issued by a credit institution to a person to purchase something. Such a loan is provided to the client as a deferred payment for any product or service, for example, the purchase of a telephone, household appliances, the provision of paid medical care, and so on. The bank also issues a consumer loan in the form of a certain amount of money (loan), which must be repaid within the time specified by the agreement.
Types of consumer loans
Today, consumer lending is quite developed. Banks offer clients various programs where they can choose a loan based on their individual needs. Consumer loans are divided into the following types:
- By type of creditor. This item includes organizations that issue funds for various purposes: banks, pawnshops, trade, and microfinance organizations.
- By type of borrower. The item is divided into the following criteria: the loan is provided to any group of persons who are citizens of the Russian Federation, a certain group of persons (entrepreneurs), special ones (persons who regularly repay the debt and receive various bonuses from the bank for the second and subsequent loans), young families, socially vulnerable groups persons (working and non-working pensioners).
- By provision. In this case, the bank requires the borrower to provide a guarantee of return, registering movable or immovable property as collateral. Most often, consumer loans over 500 thousand rubles are secured. Loans that do not require collateral are usually small - from 10 to 500 thousand. Here, only a certificate of income is required from the borrower, but in the modern trend, banks neglect this rule and provide programs that require only an identification document from the borrower.
- According to the method of repayment. There are three main types - annuity, differentiated and one-time. Annuity implies that the amount to be repaid does not change throughout the validity of the loan agreement. In simple words, the client pays a fixed amount monthly, which includes interest, late fees (if any) and parts of the amount that are used to repay the “loan body” (the amount excluding interest and fines). Differentiated means that the total loan amount is divided into equal parts, taking into account the frequency of repayment. If you look at the schedule of such a payment, you can conclude that the borrower pays the principal and accrued interest. Interest, in turn, is calculated on the balance of the principal debt. As the client pays off the debt, the monthly payment amount decreases accordingly. A one-time payment most often occurs when a person takes out a consumer loan for personal needs from a microfinance organization. This type of payment is assigned mainly if the loan amount does not exceed 10 thousand rubles. The return date is usually 30-60 days. There are no schedules for this type of payment.
- Directionality. Based on their focus, consumer loans can be divided into targeted and non-targeted. A non-targeted loan for urgent needs is characterized by the fact that the borrower can spend the money anywhere. The bank will not check where the funds were spent. A targeted loan implies that the borrower takes money to purchase a specific product and service, for example, a car, a residential building, household appliances, payment for educational and medical services, and so on. As a rule, banks do not give money to the borrower, but transfer it to the seller’s account. If there was a cash withdrawal, you will need to provide the bank with receipts indicating that the funds were used for a specific purpose.
Conditions for obtaining a consumer loan
When applying for a loan, a banking institution must evaluate the borrower by conducting the so-called scoring (evaluating a potential client for compliance with certain parameters):
- Age restrictions. Most large banks issue loans to persons from 21 to 65 years of age. This is primarily due to the fact that a potential candidate under 21 years of age may not have the necessary income to repay the debt. In some lending institutions, the minimum age is 23 years.
- A prerequisite is that the client must be a resident of the Russian Federation.
- Having a permanent place of work. At the same time, there is a nuance - the work experience at the last job must be at least 3-6 months.
- Providing identification as well as a second document. Some banks may require a military ID for men.
- If the bank cannot make sure that the client is able to repay the debt, guarantors or co-borrowers are brought in.
It is important to understand that this list presents general conditions that allow you to apply for a loan - banks may also impose additional requirements.
Bank offers
Bank Credit Bid (%) Term Sum Sberbank Loan for any purpose 12,9 Up to 5 years Up to 3 million rubles. Post-Bank Supermail Online 9,9 Up to 5 years Up to 1.5 million rubles. VTB Cash 11 Up to 7 years Up to 5 million rubles. Sovcombank Standard Plus 11,9 Up to 3 years Up to 300 thousand rubles. Eastern Bank Express loan 11,50 Up to 3 years Up to 500 thousand rubles. Home Credit Bank Cash 10,9 Up to 5 years Up to 1 million rubles. Raiffeisenbank Cash loan 10,99 Up to 5 years Up to 2 million rubles. Gazprombank Easy loan 9,8% Up to 7 years Up to 3 million rubles. Rosselkhozbank Without collateral 10 Up to 7 years Up to 1.5 million rubles. Russian standard Cash 15 Up to 5 years Up to 2 million rubles. Information on loan programs presented in the table is current as of July 1, 2019. Interest rates indicated are minimum.
How to get a consumer loan?
To get a loan from a bank, you first need to decide on the purpose - what the funds are needed for. As a rule, a consumer loan does not require the provision of a large package of documents. Next, we will consider the algorithm for obtaining a loan:
- The first step is to decide on the choice of lender. You need to study market offers and choose the best option.
- Secondly, you need to choose a loan product with the most favorable conditions.
- Then you need to contact the bank’s credit department employee to submit an application and conduct scoring (initial assessment of the client’s reliability).
- If the bank has previously approved the application based on scoring, then the client fills out a form where you will need to indicate certain data.
- Next, a package of necessary documents is provided.
- This is followed by signing a loan agreement and receiving funds or issuing a credit card.
You can also submit an application directly on the bank’s website - many institutions provide a similar service. The application is reviewed within several days. If the decision is positive, the borrower is called to the bank to formalize and sign the agreement.
Documents and requirements
To obtain a consumer loan, you do not need a lot of documents. Next, we will consider the necessary documents for the loan, as well as general requirements for the borrower:
- First of all, you need to provide an identity document (some banks require a second document);
- income certificate in form 2-NDFL for the last 6 months;
- a copy of the work record book with confirmation of length of service at the last place of work for the last 3-6 months;
- citizenship of the Russian Federation;
- The borrower's age is 21 years or older, the age limit is usually 65 years, however, some banks have special programs, for example, for pensioners, where the age limit is expanded, and the limit can reach 85 years;
- if the amount is more than 300 thousand, some banks may require collateral or a guarantor.
What to pay attention to when concluding a contract?
When concluding a loan agreement, you should pay close attention to the following points:
- Amount and interest rate. The problem here may be a discrepancy with the lender’s advertising offer, so you should carefully study the loan agreement.
- Additional services. Most often, as a guarantee of the return of funds on a consumer loan, the bank specifies insurance in the contract. All additional conditions increase the total amount of debt, sometimes very significantly.
- Indication of the total loan amount. The loan agreement must specify the total amount of the loan. It should also indicate what parts it consists of (interest, commissions, etc.).
- Payment schedule. The repayment scheme and type of payment must be specified in the agreement. The borrower has the right to choose how it is more convenient for him to pay - the bank cannot impose its own conditions.
- Possibility of early repayment. This right is assigned to the borrower at the legislative level. The agreement should not contain any fines or other sanctions for early repayment of the loan.
- Non-repayment of borrowed funds and their collection. It is worth finding out whether this paragraph contains information about the assignment of rights in case of non-repayment, and how the bank will act in case of delay.
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