Everything you need to know before applying for a loan

Everything you need to know before applying for a loan

Everything you need to know before applying for a loan, Credit is the amount of money that the bank makes available to us in order to help finance our expenses.

There are many types of credit, depending on our needs, and we obtain them after reaching an agreement with a financial institution,

which provides us with certain liquidity, in exchange for returning the amount

we have used in the agreed time together with the payment of the cost of the loan. credit called an interest rate. 

Checking her bank accounts, Maria has decided to have some more money.

What can she do in this situation? The first thing that comes to mind is to consult her bank to apply for a loan.

The guide ” You and your first credit “, prepared by Finance for Mortals of Santander Spain, can be of great help to María in this situation.

What does a credit consist of? 

A credit is a limited amount of money that a financial institution makes available to a client for a specific period of time.

This may not receive the amount at once, but can be used gradually through a bank account or a credit card,

thus managing it according to the needs of each moment.

A loan is not an unlimited source of additional income, since the client, for his part,

undertakes to pay the amount granted, plus the corresponding interest and other expenses that may be incurred, for example,

the cost of an annuity in the case of credit cards.

The credits are granted for a specific period of time, and their purpose is to cover current or extraordinary expenses in certain periods.

What are the most common types of credit? 

Loans are like a large, very diverse, and heterogeneous family,

with the ability to adapt to the needs of each client, whether it is an individual or a company.

Thus, there are online credits, requested online, fast credits, those of small amounts granted for a specific moment, the “revolving”,

which can be used repeatedly up to a limit (such as a credit card), mortgage loans,

intended for the purchase of a home, or educational loans, which are intended to pay university tuition, among others.

In the “ Dictionary ” of the SanodeLucas website, created by Santander Chile,

you can find the definition of these and other financial terms.

What do credit cards provide?

You can make use of the money from credit through a credit card,

as explained in Finance for Mortals about the different types of cards.

These are those plastics in which the bank makes a limited amount of money available to you for you to use on a monthly basis.

Thus, it is a way of buying with money that has been loaned by the bank, and which you must return at the end of each month.

If you do not, you will have to face the payment of certain interests.

In this Santander Mexico infographic, you can see some considerations when deciding to hire a credit card.

What should we take into account when choosing a loan?

Before applying for a loan, regardless of the type, we have to pay attention to the following questions:

• Interest rate
  It is the extra money that we have to pay to the bank for the credit that it has granted us.The interest rate is usually expressed as a percentage. There are different types of interest (fixed, variable, or mixed).

  In Finance for Mortals, you can find out the details of the three classes of interest rates.

• Commissions
  When requesting the credit, the bank can ask us to pay a series of commissions (opening, management…).These expenses associated with the granting of credit are usually expressed as a percentage.
• Monthly fee
  When requesting a loan, we will have to pay monthly fees, as explained in this Finance for Mortals article.The installments are, therefore, the amount that we have to pay each month and include the interest and the proportional part of the amount used of the total credit.
• Capital
  It is the maximum amount of money that the financial institution makes available to us when we request a bank loan.
• Maturity
  This concept refers to the deadline from which the credit that has been granted to us can no longer be disposed of.

When is it convenient to apply for a loan and when is it not?

Applying for a loan is something that can make life much easier, but we must analyze if we are at the right time to request it,

as explained in SanodeLucas. For this reason, it is convenient to borrow money when it comes to making an investment,

for example, to allocate more resources to the education of our children or reform the kitchen at home.

In this infographic prepared by Santander Mexico, you will be able to discover when it is convenient to apply for a loan and when it is not.

Also on the website The Hub of Santander UK they explain in detail that it is not advisable to request a loan

when our income is already committed to the payment of other debts.

And it is that good credit behavior will help you to have access to other credits and better conditions in the future.

Credit and debit: what does each term mean? 

When talking about credit, such as the financing that a financial entity grants us -for example with credit cards-,

it is important to mention the difference that exists with debit, which represents the money that is our property,

that is in our bank account and which we can use by means of a debit card.

Don’t miss this video created by Santander Mexico, in which they discuss the advantages and disadvantages of different forms of payment, including debit and credit cards.

And what is the difference between a loan and a credit?

A loan is a contract with our bank. What does it consist of?

The entity lends us a fixed amount of money in exchange for us contributing as a guarantee of payment, for example,

the house or the car that we have bought with that money.

However, if what we obtain is a credit, in that case, we can make use of the entire amount offered or only part of it,

and it can be renewed, something that does not happen with loans.

You can learn more about the differences between a loan and a credit on the Openbank blog.

Remember that the responsible use of tools provided by banks, such as the different types of credit, can help you successfully achieve your financial goals.