The “instant credit approval” – what is meant and was not

Many consumers today apply for a loan online through one of the myriad of online banks. This has advantages, because the conditions of these banks are much better than those of the branch banks. However, sometimes it is difficult to quickly choose a bank. Terms appear that the customer sometimes cannot do much with. This includes the term credit with immediate approval. How to get a loan quickly and easily?

What is an instant loan?

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There are situations where the loan needs to be processed quickly. In this case, anyone who applies for one on the Internet must look for a loan with an instant commitment. In this case, the banks check the creditworthiness of the customer directly during the loan application and prepare a household bill. If the creditworthiness and the income are correct, the corresponding bank gives a loan with immediate approval. The customer can be sure that the money will be in their account within a few days.

Not to be confused with an instant loan

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An instant loan should not be confused with an instant loan. It is a different loan model. In the case of an immediate payment, the loan amount will be paid out within 24 hours after approval. There is therefore a preferred processing of the loan application. The payment is then made with a lightning transfer, which is subject to a fee. Not every bank offers an instant loan.

 

What happens after the loan approval?

It can take a few days before a loan with an instant approval is paid out. The bank first needs the signed loan agreement and the income notices. A copy of the employment contract and the latest account statements may also be required. The bank can only transfer the loan amount after receipt of the complete documents.

Credit with instant approval without Credit Record

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There is also a loan with an immediate acceptance without Credit Record, and as the name suggests, Credit Record is not asked in this special case. As a rule, it is intermediaries who can make such a loan possible. These loans often come from abroad. The Credit Record is not queried in these cases because the banks abroad have no access to it.

The necessary security must then be provided elsewhere. As a rule, the collateral includes a fixed salary, which must not be from an independent activity. Although these loans are more expensive than conventional installment loans, they are happy to be taken up by consumers who can no longer get a loan due to the negative creditworthiness in Germany. However, this loan is not suitable for the unemployed.

First loan? Check what you should know

Dreams come true. They meet more often than we can imagine. Sometimes in completely unexpected circumstances, sometimes it happens according to plan, which we owe to our own efforts and patience, which sometimes a loan comes to the aid. The moment of waiting is often more pleasant than the moment when our dreams become reality.

Dreams are different. There are those that involve a journey into the blue, with a backpack on the back and a map in your hand, or an exclusive trip to one of the Greek islands. There is also a new computer, a few years old cars, replacement of furniture in the apartment, or windows in the living room. Everything pleases, but everything also costs, and sometimes quite a lot.

That’s when the loan comes to the rescue. And although taking it is so simple that it just can’t be simpler, you definitely need to know things. It is worth having technical aspects in mind to be sure that we fully understand the whole mechanism, the repayment system. That all the terms and abbreviations in the glossary are clear and transparent and that the terms we agree to are fully understood.

First of all – what is it?

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A loan is, as the name implies, borrowing money from an entity (this applies to both institutions and private individuals), which has the appropriate amount, of course, on strict conditions. The borrower undertakes to the lender that he will repay the said amount within a specified period.

It is not necessary to specify the purpose for which the funds will be allocated (and this is what distinguishes the loan from the loan, where this purpose must be specified), theoretically, it is also not necessary to specify the repayment terms (interest). In practice, however, if we take out a loan in trusted financial and banking institutions, the cost of credit is always clearly defined.

Salary – the interest rate called interest

Salary - the interest rate called interest

It is of course very nice of all institutions that they want to lend us money to make our dreams come true, but we must be aware that they are not charities. These entities must earn a living. They do it honestly, transparently, but it is quite obvious that they expect some remuneration for their activities, i.e. for handling transactions.

In this case, it has the form of a commission, which is usually called interest. Interest is a creation that everyone has ever heard of, but many do not quite know what they really are. It’s quite simple. This is the percentage of the amount borrowed by which the repayment of the liability is increased.

Different forms

Sometimes they have a slightly different form and are simply security for the lender against late repayment by the borrower. If he does not repay the money borrowed on time, he is charged a percentage of the amount borrowed, usually for each day of delay. You have to be careful, because while traditional interest, which is at the expense of the obligation, is quite reasonable, the latter, very often, is very high.

The maximum cost and interest rate of the loan is regulated by the Anti-usury Act. This is to encourage those who borrow to pay the commission within a penny. Sometimes it is possible to postpone the repayment date, although here also it usually involves additional costs.

Sometimes clients are asked to freeze the full amount or deposit funds as collateral for the liability. It is dangerous because if we are late with the payment by even one day, the whole amount may disappear. The chances of getting it back are basically zero.

Difficult words that are worth knowing

Difficult words that are worth knowing

It is worth meaning the words and phrases that the loan offer. One of them is basically not a word, but an abbreviation – APRC. It sounds scary, but you don’t have to be afraid of it. However, it is good to understand them, because both in the case of loans and credits, it plays a significant role.

The APRC is the Actual Annual Interest Rate. This is nothing but a number (usually expressed as a percentage), which tells about the full cost of a consumer loan or loan. For the calculation of the actual annual interest rate, all fees associated with the commitment are taken into account – from interest, through handling costs, to handling costs, or other types of a commission that the lender charges.

Are interest and loan commissions a tax deductible cost?

Even if you respond to the accountant by phone to the word “tax-deductible” or “taxes”, it would be good for you to know the most important rules for including interest and other costs in loans.

It is true that these rules are generally simple, and the conditions for including it costs quite obvious. But taxes would not be taxes if they did not hide potential surprises. It is worth knowing about them in advance so that you do not find yourself in a situation where the accountant will clear you away and you will pay more tax than you could.

In the case of a sole proprietorship, the costs of interest and fees associated with credit, from a tax point of view, do not differ much from other costs of doing business. The rules for their “tax deduction” (actually, reducing their tax base) are almost the same as for other expenses.

Interest and commissions – are they tax-deductible?

For the record, let’s remind you: a given cost can be considered as a tax-deductible cost when – as art. 22 of the Personal Income Tax Act – is “incurred in order to achieve income or to maintain or secure a source of income”. In the same art. 22 there is also an additional condition: the cost cannot be on the list of exceptions, which in turn is included in art. 23 of the Act.

Fortunately, there is neither interest nor other borrowing costs on this list? Credit or borrowing costs, such as commission or interest, so you can treat virtually the same as all other costs.

Interestingly, the cost of obtaining income does not have to be the cost of a company loan – it can also be the costs of … consumer credit for individuals, if it is used for business purposes. Small entrepreneurs sometimes take advantage of this opportunity, because a company loan in a bank is often simply not available to them.

It should be remembered that if the given costs are not on the list of exceptions listed in art. 23 of the Personal Income Tax Act, this does not mean that they can immediately be included in tax-deductible costs. The tax authorities, as well as the case-law of administrative courts, take the view that, in order for expenditure to be deductible, the following conditions must also be met:

– such a cost should be borne by the taxpayer, i.e., in the final analysis, it must be covered from the taxpayer’s property resources (not taxpayer’s tax-deductible expenses that were incurred on the taxpayer’s activities by persons other than the taxpayer),

– it is final, i.e. real, so the value of the expenditure incurred has not been reimbursed to the taxpayer in any way;

– incurred in order to obtain, retain or secure revenues or may affect the amount of revenues achieved;

– has been properly documented.

In case of doubts as to the possibility of including a given expense as tax-deductible costs, it is worth submitting an application for an individual tax interpretation in which the tax authority will state in a particular case, i.e. the facts regarding the taxpayer as to the application of tax law.

The interpretation will also provide protection for the taxpayer in the event of a tax audit. An application for an individual interpretation may relate to the actual state in which the taxpayer is in a given moment or future, which according to the taxpayer is yet to occur. Therefore, withdrawal from the abovementioned application and obtaining a binding interpretation of tax regulations allow to a large extent to plan and reduce tax risk in business.

Loan for any purpose? Yes, as long as it is not intended for any purpose

Loan for any purpose? Yes, as long as it is not intended for any purpose

Here, however, lies the first catch associated with credit costs being deducted from tax-deductible expenses. On the one hand, consumer loan costs can be recognized as tax-deductible costs, but on the other, it is not the case that every company loan qualifies for its costs as tax-deductible costs. The decisive criterion is not the name of the contract but the actual purpose of the loan.

Fortunately, a very good indicator here is simply common sense. If you really spend the company loan on the needs of the company – purchase of goods, equipment, software, etc. – everything will be all right.

But if you take a company loan of 50,000, and then stick a card on the door to the company, “closed, I went to Hawaii, I’ll be back in 2 months”, and a representative of the Tax Office will come to you, let’s put it this way: after two months you will has had at least two months of control?

Income tax costs for an investment loan

Income tax costs for an investment loan

An investment loan is another potential problem. Here, it is true that the entire interest and cost of the loan will eventually go to costs, but the key is the word “ultimately”. In the case of investments, all related expenses that are incurred before entering the item (machinery, equipment, etc.) in the fixed assets register are not recorded as costs, but increase the value of the investment.

This also applies to credit costs. Only interest (or other fees) which become due only after entering a given item in the fixed assets register directly go to the costs. Earlier interest and fees will gradually turn into costs only with depreciation.

IMPORTANT NOTE: in the case of interest and commissions, the date of their calculation is important. If the interest accrual date was before entering the subject of the investment in the fixed assets register, then even if you delay the transfer (which of course we do not recommend for obvious reasons), you will not gain anything. Interest will increase the value of the investment object anyway and will not go directly to costs.