What is a personal loan?

  • by stas enero 10, 2022
  • 139600

In many occasions we request loans with less information than we should have and with some urgency, situations that are not advisable to be able to negotiate in the best way.

To begin with, we are going to define in a simple way what a personal loan is, which is nothing more nor less than a banking product that allows the client or borrower to receive a certain amount of money (the so-called loan capital) from a credit institution (lender), in exchange for the commitment to repay that amount, together with the corresponding interest, through periodic payments (the so-called installments).

They are called personal loans because in this type of loan the entity does not usually have a special guarantee for the recovery of the loaned amount. Thus they have as a generic guarantee the debtor’s present and future assets.

The loans with personal guarantee are normally destined to the purchase of goods and services of consumption: a car, a computer, to furnish the house, to go on vacations, studies abroad.

They are not usually for large amounts. In addition, the customer is liable for the fulfillment of his obligations (repayment of the amount borrowed and payment of interest and bank commissions) with all his assets, both present and future. For this reason, it is normal that before giving the loan the credit institution studies the client’s capacity to pay, requesting proof of his income (paychecks, rents…), an inventory of his assets or a sworn declaration of his patrimony.

The client does not usually commit himself to any particular asset (for example, a home, as is the case with mortgage loans), so the processing of this type of loan is usually faster than that of a mortgage loan. However, they usually have a higher interest rate, i.e. they are more expensive.

Consumer loans
This Law applies to contracts in which a natural or legal person, in the exercise of his commercial activity, profession or trade, grants or undertakes to grant to a consumer a credit in the form of deferred payment, loan, opening of credit or any equivalent means of financing, to meet personal needs outside his business or professional activity and the amount of which is at least 200 euros.

The special consumer protection established in this regulation focuses on the information and actions prior to the conclusion of the credit agreement, on the information to consumers, on the content, form and cases of nullity of the agreements, the right of withdrawal and on the determination of concepts such as the total cost of the credit and the annual percentage rate of charge, delimiting the cases in which the total cost of the credit may be modified and including the conditions to which the modification agreement must conform.

With regard to contracts entered into by consumers in which it is expressly established that they are linked to the obtaining of a financing credit, it is provided that failure to obtain the credit will render the contract ineffective, leaving intact the rights exercisable by the consumer, both against the supplier of the goods or services and against the entrepreneur who had granted the credit.

In this way we find:
Rights in linked contracts:
This Law establishes that the consumer who has obtained a consumer credit, has against the credit institution or businessman who granted it, the same rights that he would have against the supplier of the goods and services acquired with the money of such credit, provided that the following conditions are met:

That the goods or services have not been delivered in whole or in part or are not in accordance with the agreement.
That the consumer proves that he has claimed in or out of court against the supplier and has not obtained satisfaction.
Right to request the ineffectiveness of the credit agreement:
The Law also says that the ineffectiveness of the contract for the acquisition of goods and services – that is, the termination of such contract declared by the courts, for having been breached by the supplier – will also determine the ineffectiveness of the consumer credit contract that financed it – and therefore the termination of such contract.

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