Let’s start by remembering that a personal loan has a functioning that follows the content of the contract signed, although the mechanism underlying this relationship is now “almost” schematized. In fact, the subject who is interested in obtaining a certain amount of money in financing will turn to his creditor providing all the details necessary to enable him to carry out a proper analysis on his creditworthiness (that is, to understand if the debtor will be or less able to return the money obtained on loan). For this reason, the debtor will provide the creditor with the following documents:
– identity documents (useful for identifying the person requesting funding);
– income documents (useful for identifying the debtor’s employment relationship, his net monthly income, any deductions, and so on).
– expense documents (not always mandatory).
Once the creditor (assuming, the bank) has obtained a copy of the documents outlined above, it will initiate a preliminary investigation that will also involve other sources of information (for example, the Central Risks) and will end with a positive resolution (that is, availability to disburse the loan), a negative resolution (i.e., the refusal to proceed with disbursement) or an intermediate resolution (for example, since the bank deems it useful to acquire other documents, or the guaranty of a guarantor, and so on).
If the bank communicates its willingness to dispense, it will arrange an appointment with the debtor in order to sign the loan agreement. The debtor will naturally have the right to receive a copy of the contract in advance: a caution that will allow the bank’s customer to check the economic conditions applied (paying particular attention to the rate, the investigation fees, other one-off or recurring expenses) and the other characteristics (duration, periodicity of installments, and so on).
How to choose your lender?
- Choose based on your needs
Whether you are moving to short-term funding or long-term funding, all choices must be based on your real needs. If you are in an emergency financial situation, loans with a term of up to 24 months can help even though the risk of high interest rates lurks. You may be able to consider a lender who can provide a loan with a period of more than 2 years. Of course you must realize that the longer the loan period, the greater the value of money you have to pay.
- Loans in advance? Why not?
To make sure everything is safer, choose a lender who is able to offer loan terms in advance. Physical address is also an important factor in deciding your lender. Don’t forget it!
3. Comparing costs
Comparing costs is a must. You need to know an outline of what you will face. Cost comparisons usually include the total amount you have to pay along with the applicable interest rate; whether fixed or not.
By paying attention to the above points, you can minimize your risk of being trapped in chronic debt and other financial difficulties.