When you need financing, the most usual option is to go to a bank. Conventional entities offer a wide variety of loans for any purpose: buy a car, reform the house, cover unforeseen events … On our page, you can compare the best bank loans in the market and choose the one that best suits what you really need.
How to distinguish credits from bank loans?
If we want to buy a good or service with a high price, such as buying a car, a home or a computer, we will most likely have to resort to bank loans to get the extra money we need. Lenders can offer free credit counseling for payday loans.
With your loans, a bank puts a fixed amount of money at your disposal and we, in return, commit to return the entire amount and pay the interest accrued on all the capital owed from the bank loan within a period previously agreed.
Bank loans, on the other hand, work a little differently. These products put at our disposal a certain amount of money and we can make the arrangements we want when we want (without exceeding the maximum amount of credit). In return, we will have to return all the money to the bank, although we will only pay for the interest accrued on the disposed capital.
Although loans and bank loans are not exactly the same product, they are often used as synonyms, so in many cases (also on this page) we will see that the two terms are used to refer to the same type of product.
What financial products do banks offer?
The catalog of credits offered by banks is very broad: we can find everything from personal loans to finance a project (such as buying a car or home renovation) to mortgages to buy a home. Next, we will see what types of bank loans exist and what are their main characteristics:
Mortgages or bank loans for home purchases
Mortgages are bank loans that are used to acquire a property. The guarantee of this bank loan is twofold: it is both personal and the property itself, which means that, in case of default, both the present and future personal assets of the borrower (accounts, salary …) and housing can be seized. bought with the mortgage. Mortgage loans tend to be very high and their repayment term is many years (between 10 and 40 years). As for the interest rate, these bank loans can have a fixed or variable interest, although the latter is the most common (usually referred to Euribor). In general, to get a mortgage we will also have to contract a series of linked products, such as home insurance, life insurance, and so on.
Bank loans with a personal guarantee
Bank loans with a personal guarantee (with personal guarantee) are the most commonly used products to finance relatively expensive private projects, such as buying a car, renovating housing or paying university fees. As the name implies, the guarantee of bank loans is exclusively personal, so the owner responds to the defaults with all their present and future assets. Nowadays, there are several types of bank loans whose guarantee is personal, but these are the best known:
- “Traditional” personal loans: they are bank loans destined to finance the acquisition of goods or services. We can find bank loans for any purpose as well as loans for a specific purpose, such as buying a car or paying for studies. The interest of these bank loans is higher than that of mortgages and is usually fixed, although we can also find loans with variable interest. The amount of this bank loan can be more than 50,000 euros, while the repayment period is usually between 1 and 8 years.
- Payroll Advances: if we need money to cover an unforeseen event or for any other purpose we can also ask the bank to advance the amount of one or more payroll. The money we can get depends on the amount of our payroll and the number of advances that allow us to request our bank. To apply for these bank loans, it is necessary to have the payroll registered at the entity and have your trust.
- Pre-granted bank credits: these are loans that the banking entities make available to their more solvent clients. The interest rate, the amount and the return period may vary depending on the bank and the customer’s profile.
According to our financing needs, we can go to one type or another of bank loans to choose the financing that best suits our economic needs. For example, if what we need is fast money, a pre-agreed loan or a payroll advance will be the most appropriate.
Although many times we do not perceive it in this way, credit cards work in a very similar way to bank loans, since they also put an amount of money at our disposal that we will have to return within a certain period and, in case of using the fractioned payment method, paying interest. The limit of bank credit that we can use each month will vary depending on the conditions of each card and the risk profile of the client, but in general, it will range between 1,000 euros and 10,000 euros. Regarding the price, the interest on credit cards is usually higher than the rest of bank loans: between 12% and 30% APR.
Common costs of traditional bank loans
Each type of bank loan can have a different price, although its cost will always be marked by the following aspects: the interest rate applied to bank loans, management fees and other additional costs, such as the hiring of linked products or payment to notaries.
The interest rate on bank loans
The interest rate is a percentage that is applied to the capital pending payment of the credits and is what establishes how much money will have to be paid in each installment and in total. The interest of a bank loan can be fixed or variable: if it is fixed, it will remain constant throughout the life of the loan, while if it is variable, it can change in each revision if the index taken as a reference (usually the Euribor) suffers some modification. The rate that shows what the interest rate applied is the TIN, although to compare the price of several bank loans it is better that we look at the annual equivalent rate or APR, which reflects both the interest on a loan and its commissions.
Commissions on bank loans
The credits that the banking entities grant also usually include commissions, which are the costs of the procedures and the procedures that a bank must do to put the money at our disposal or to modify the contract in one way or another. These are the most common commissions:
- Of study: it is the cost of the evaluation that the bank does to verify our level of solvency. If we are not granted funding, they will not charge us.
- Opening: to be able to access some bank loans we must also pay this commission, which in principle is the price of the procedures performed by the entity to put the money at our disposal.
- By modification of the contractor by the change of guarantees: they can also demand a remuneration if we modify the contract or change the guarantee of the bank loan.
- For partial or total early repayment: some entities can also claim financial compensation if we return all or part of the money borrowed before what was agreed in the contract.
As each entity charges the commissions it deems appropriate, we can find bank loans that include all these commissions and credits that do not have any of them. The cost of commissions is not reflected in the nominal interest rate (TIN) but in the annual equivalent rate of the loan (APR). Therefore, to know how much they will charge us in commissions, it is advisable that we look at this last indicator and read the section of contract costs of the bank loans that we are studying.
Other costs added to the loans
In many cases, in order to obtain the loans offered by banks, we must also contract other financial and non-financial products. The most common is that we have to direct our income and receipts, contract insurance or credit or debit cards with minimum annual consumption. In some cases, we will not have to buy these products to get bank loans, although doing so will allow us to enjoy better financing conditions, such as lower interest or fewer commissions. In any case, as each entity establishes its own conditions, we can also find bank loans that do not have linked products.
In addition, it is likely that we will have to sign the loan contract requested against a notary as an additional guarantee, especially in financing products of high amounts. In these cases, the notary’s fees will be included in the total loan cost, but we will not see it reflected in the APR. Therefore, we must review the fine print of the contract in order to see how much they will charge us for this additional expense.
Requirements to get a bank loan
The requirements that we will have to meet to obtain bank loans may vary depending on the entity we go to, depending on the amount we request, the type of bank loan and the purpose we want to give the money. However, in most cases they will ask us to meet the following minimum requirements:
- Be of legal age and reside in the national territory. Depending on the purpose of the loan, we may be asked to have a minimum of 21, 25 or 30 years, as in the case of bank loans to buy a vehicle.
- Have a sufficient and recurring source of income with which to deal with the cost of bank credit. It is usually required to have a payroll or pension of sufficient amount to be able to pay the loan installments.
- In most cases, they will ask us to be clients of the bank, although it is also possible to obtain bank loans in other entities without having to be linked.
- Have a good credit history, that is, have returned without problems the bank loans that we have requested throughout our lives.
- Do not have outstanding debts. If we are registered in any register of defaulters (ASNEF, RAI, EXPERIAN …) we can not access bank loans and we will have no choice but to go to private equity companies.
If we comply with all the previously mentioned requirements, we will not have problems to access personal loans. Also, if our history is positive, we can enjoy different advantages in the conditions.
Regular documents to request a credit to my bank
As a general rule, we will always have to submit a series of documents to demonstrate that we comply with the requirements demanded by the bank, although if we request bank loans to our entity, we will not have to provide so many papers. In addition, with the incorporation of fintech – technology applied to finance – many entities will allow us to apply for bank loans through the Internet and will not ask for more documents than those indicated below:
- Photocopy of our identity document (DNI, NIE or passport) to verify that we reside in Spain and that we are within the age limits to access the bank loan.
- Proof of income. To obtain bank loans we will have to present our latest payroll in the case that we are employed workers, the last pension receipts if we are pensioners or the last VAT years if we are self-employed workers. In addition, they may ask us for the last income statement. In this way, the entity can check if with our level of income we can return the bank loan.
- If we ask for bank loans to an entity that is not ours, we will also have to present an extract of our accounts with the latest movements.
- If we ask for bank loans to finance the purchase of a specific good or service, such as a car loan or a loan for studies, we may also ask for the budget of the project.
We should also know that, although those that we have just mentioned are the most typical and general ones, we can meet with entities that ask for more or fewer requirements, since it is something that each company establishes.