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?
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
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.
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
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.