A loan called a contract between an institution which is a bank and a natural person, i.e. a client. The bank provides the client with money in the amount that the client would like to receive for a certain period of time.
However, the borrower, who became the client, undertakes to return the amount of credit used, including interest and to pay the commission on the amount provided in accordance with the contract in which the client signed. The loan agreement must be concluded in writing.
Features of cash loans
In accordance with banking law, a credit agreement signed by a bank and a client must contain information about:
- Parties to the contract – this is the information between whom the contract was concluded, i.e. between the bank and the client
- Purpose of the loan – depending on the type of the obligation, it may be information that the funds that the customer receives are for any consumer purpose or car, flat, purchase of, for example, specific RTV equipment or household appliances, etc.
- Its height and currency – information is provided about the amount of the customer received net, ie “on hand”.
- Principles of incurring – in this part it is advisable where the financial commitment was made. It can be a bank branch, online application or telephone helpline.
- Repayment term – here the information on the period for which the loan was granted is indicated. Usually banks grant them from 3 to 120 months. At the end of the contract, a schedule is attached, detailing in which period and in what amounts the customer will have to make repayments. The installment is always divided into interest and capital, which in total gives the total amount to be settled by the client.
- Interest and commission – the most important information for the client. In this paragraph, the bank indicates the percentage it receives from the funds borrowed to the client and a commission for granting such a liability, which may be credited or deducted and payable once.
- Conditions of change and termination of the contract – in the event that the client would have problems with repayment of the installment within a specified time or payment mismatch, in this chapter the bank informs the client what to do. Usually, any changes can be made by the client only with the consent of the relevant faculty in writing.
- Security – banks often secure their loans with insurance in the event of a client’s death, insolvency, for example, a flat or house pledge (in the case of a mortgage).
- Regulations on possible repayment and loan utilization control – in the case of non-compliance with the terms of the contract and failure to repay the obligation, the banks publish information on possible control and coercion to enforce these funds, clients sign a contract and consent, and hence, incur additional costs from the installment payment delay.
- The method of making a certain amount available to the borrower – the customer has the option of paying the installment in cash, for example at a bank branch or on a credit account.