Contract loan credit what do you need to know?

Nowadays, it is hard to find a stable and well-paid job. Fixed-term contracts, commission contracts or contracts for specific work are the daily bread.

In turn, the need to obtain additional financing in the bank, sooner or later probably everyone will. Does this mean that we don’t have a chance for a loan when working on a commission or a specific work contract? How do you approach a loan to get it?

What exactly is a contract loan?

What exactly is a contract loan?

The loan under the mandate contract is not separate in terms of the purpose of the loan. In this case, the type of financing, which is a loan under a mandate contract, was highlighted due to the loan collateral. In this case, it is about any liability at the bank, which will be secured by documenting employment and income, a mandate contract or a work contract.

For whom credit on a commission contract

The group of clients to whom this offer is addressed is, of course, all persons who can confirm their employment and the amount of remuneration by means of a mandate contract or a specific work contract. The loan can be granted to persons whose commission contract is continuous from min. 3 months.

What about creditworthiness?

What about creditworthiness?

At present, probably every bank customer is aware that in order to receive a loan, one needs to prove their creditworthiness, that is, among others, to document stable employment and stable income. In turn, the mandate contract is characterized by a short period and irregular payments. Therefore, there are often fears whether working on the basis of a mandate contract or a specific task contract, we have a chance to obtain financing in the bank? Does one not exclude the other?

The answer is simple in this case. Working on a commission or a specific work contract, we can apply for a bank loan. How is this possible?

Not only the type of contract matters. Stable employment and high income do not always go hand in hand with a permanent employment contract. Not just a work contract or a mandate contract. Freelancers are becoming more and more popular and it is not difficult to find a freelancer who earns a lot more than full time.

The borrower’s credibility and credit history are also significant. Scoring Credit Checker has often determined the bank’s final decision regarding financing. It is only the combination of all these aspects that gives us a real picture of a potential borrower.

Seeing market demand, banks must regularly change and shape their offer in line with the needs of society. Hence, a much richer offer than just a few years ago and an increasingly popular loan contract.

What will the bank consider when assessing our credit standing?

What will the bank consider when assessing our credit standing?

1) Employment experience with the current employer – JUST 3 months of employment so that you can get a loan.

2) The period for which the mandate contract or contract for specific work is concluded – the longer the better, however, it is possible to obtain a positive decision even if the contract ends in a month

3) Amount of remuneration – it can be documented with extracts or bills from the mandate contract

4) Credit history – the Credit Checker report needed to analyze the situation can be downloaded independently.

4) Borrower’s credibility, i.e. scoring in Credit Checker – many factors decide here. An experienced credit expert knows how to increase scoring and increase the chances of a positive bank decision.

5) Fixed expenses and liabilities – loan installments, limits on credit cards or alimonies, etc.

How much credit on a commission contract can I apply for?

When verifying the customer’s creditworthiness, the bank pays attention to the form of employment, but this does not prejudge the final decision. As we have already pointed out, creditworthiness consists of a number of factors. In turn, the amount of funding that we can receive will mainly determine the amount of our income confronted with expenses and other liabilities.

Even very high incomes will not help if our expenses and obligations are even higher. According to the bank, we have to have free funds in our home budget every month that could be used to pay the installment.

Home loan is more expensive than it seems

The home loan may seem relatively cheap at the moment, but appearances are deceptive. Despite the fact that the banks offer low interest rates, on the other hand they earn more than enough, since there is a considerable margin. The interest that one has to pay is currently extremely low, so it is no problem to adjust the interest on home loans downwards. Keep in mind, however, that people are anticipating rising interest rates and that interest rates will therefore never fully fall in line with current market rates.

 

3.8 – 4% interest

home loan

Borrowers have the option to indicate the rate at which they were able to take out a home loan. That helps others in conducting sharp negotiations, but it is also an interesting indicator of the state of affairs. It appears that in many cases banks are willing to offer an interest rate of 3.8 – 4% on a home loan with a term of 25 years. That seems a low percentage, but it is still a lot more than the interest that the banks are currently paying to get money.

 

Annually adjustable interest formula

Annually adjustable interest formula

The interest rate within an annually adjustable interest rate formula is much lower, but on the other hand, the banks earn much more from it. It is possible to pay approximately 2.5% interest, which makes it possible to take out an advantageous home loan. However, it is the banks that benefit most, since the reference index for that credit formula is currently barely 0.097%. This means that the banks have a margin of almost the full 2.5% and have hardly any costs in that regard, while the home loans on the other hand do generate money.

 

Rising interest

Rising interest

The relatively high interest rates (compared to the market interest rate) on home loans with a duration of 10 or 25 years can best be explained by looking at ‘funding costs’. Such a long term means that the bank has to ‘refinance’ the money at a certain moment. There is a good chance that the interest will have become a lot higher, which means that more costs will have to be incurred. The banks are already anticipating this by raising the market interest rate as it currently exists by a certain percentage in order to be able to cover the higher costs properly later.

Rules that can solve a major problem in the consumer credit market

When a negative answer is received due to excessive financial obligations or debt, the resident tries to borrow elsewhere. And sometimes it works, according to specialists from General Financing and Best Finance. They believe that the new amendments to the Consumer Credit Law are not aimed at limiting such cases and that they will not solve the problem of over-indebtedness.

Among the recent changes in the law

loan law

Only one point has the clearest link with responsible lending. It is an obligation to assess a person’s creditworthiness by verifying the accuracy of the information provided by the person. If the problem has been labeled as debt, then the measures must be targeted. First and foremost, it is one-size-fits-all enforcement of the law. Second, operational enforcement of the law. The infrastructure needed for responsible lending is there, ”says Andrius, CEO of Best Finance, a credit bureau.

According to General Financing and Best Finance, 79% In cases where applications for funding were rejected by General Financing, residents turned to other financial institutions for funding there. 52% received credit from them. According to the study, 24% of the contractors later became debtors and 76% paid on time.

General Financing does not provide more than 50% of consumer credit

interest rate

 The main reason is too low a person’s income or too much financial liability already existing. According to Konstantin, CEO of General Financing, he should not receive credit from other financial institutions without a consumer credit in the company he manages, in a responsible market.

“Statistics show that a negative response from a company conducting a responsible customer solvency assessment does not stop people from willing to lend and more self-assessing their financial capabilities. These people are no longer eligible for consumer credit, but some still get it because they turn to irresponsible companies.

The consumer credit market can be cured by three simple rules

The 40% rule and enforcement. This rule requires that the financial obligations of residents should not exceed 40 percent. from their monthly income.

Prohibition of granting loans to persons who are already in arrears. Currently, such a provision is not explicitly enshrined in law.

Mandatory verification of financial obligations at the credit bureau and reporting. Currently, any consumer credit institution that operates responsibly can verify that a person is not over-financially liable. Irresponsible companies not only do not check such information before granting consumer credit but also do not provide information about their credits to responsible companies, thus limiting the ability to correctly assess the customer’s obligations.

“Compliance with all three rules is already in place and the necessary measures are in place. We have a SODRA database to implement rule one, and the credit bureau compiles a credit history to help you comply with the other rules, says Konstantin Balakin. “Offenders can be disciplined now, waiting and delay will only exacerbate the problem.”

Credit history can save thousands of dollars

The Swedbank Institute of Finance estimates that a mortgage borrower with a solid credit history can save up to $ 10,000. dollars. By comparison, the average salary earner earns such an amount over a year.

Head of the Swedbank Institute of Finance, having a home loan above the average loan amount ($ 55,000) will bring even more credit. It is therefore recommended to look for improvement and maintenance responsibly.

“For many people, for a variety of reasons, those who do not have the best credit rating will shake hands: I am still poorly rated by credit institutions and still struggle to make timely payments. However, when these people start paying their premiums on time, they will improve their credit history in the long run and eventually save, ”says CvilikienÄ—.

That financial discipline eventually pays off

That financial discipline eventually pays off

Is further illustrated by a financial expert. Lending a car 5 ths. A good credit history saves you $ 500 and a down payment of $ 10,000. up to 1.7 thousand. dollars.

According to the head of the Swedbank Institute of Finance, depending on the risk profile of the customer, based on the credit history and the data available to the banks, the customer can save up to a quarter of the interest payments.

Andrius Bogdanovich, head of Good Finance, a credit bureau, said people are increasingly aware of these opportunities, but many are concerned about them too late. “There is a growing awareness in the public that good credit history creates the conditions for more favorable financing. Citizens are wondering how to keep it tidy or repaired, but usually only when they are ready to take out a loan. I would advise you to focus on a few key points before and before borrowing. They will save you thousands of dollars, ”comments the head of Good Finance.

Take a look. If a person does not know exactly what their financial situation is, it is difficult to change anything. It is therefore recommended to consult your credit history report, which is provided free of charge on a yearly basis through the My Good Finance self-service system. The study shows that 76 percent. Consumers start to become interested in their credit history only after banks, leasing, consumer credit or telecommunication companies reject their credit application or hire purchase.

Borrow moderately and moderately

Borrow moderately and moderately

The Bank of Lithuania proposes a 40 percent rule. According to it, you have to calculate to spend up to 40% on loan repayments and interest payments per month. of regular income. The Swedbank Institute of Finance recommends that this share be further reduced by up to 30 percent. If your credit history is strained by excessive financial commitments or excessive borrowing, it’s time to think about lowering your credit appetite.

Do not overlap liabilities. If you see that you are unable to repay your loan or that you are late, consult your bank or another creditor for a loan deferral or other solvency decisions, but do not take a new credit to repay your previous installments. There is one exception – when a financial institution offers to refinance its existing loans on more favorable terms.

Do not borrow for a down payment on the loan

Do not borrow for a down payment on the loan

Banks are right to require home borrowers to have 15 percent. its value down payment. Not only will you try to borrow it from another bank or credit institution, it will not only worsen your credit history, but also place an excessive financial burden on you.

Cover any overdue payments, if any. You have a record of overdue payments in your credit history of $ 240K. population. Of these, as many as 27 thousand. late payments of up to $ 10. The sooner you cover them, the sooner your credit history begins to repair.

“Starting to improve your credit history will not only pave the way for a future home loan or new car lease, but you will also have long-term habits of paying down,” adds J. Cvilikiene, Head of the Swedbank Institute of Finance.

How to improve your credit standing?

Regardless of what type of loan you apply for, the bank will check your creditworthiness and history in a Credit Checker in the process of processing your application. When applying for a small loan, we usually don’t encounter any major problems in this matter.
However, if you plan to take out a housing loan or a larger cash loan (or consolidation loan), it is worth analyzing your financial situation and checking your creditworthiness in advance.

Its significant understatement can be affected by many aspects that we didn’t even think about, such as a credit card we have and not used, or seemingly innocent television installments. We have a real impact on improving our creditworthiness.

Cancel your account and credit card limits

Cancel your account and credit card limits

We often decide to apply for a credit limit or a card, although we do not actively use them on a daily basis. For many people, these financial solutions provide security in the event of sudden, unforeseen accidents. Unfortunately, both of these credit products (even if we do not use the limit granted to us) cause our creditworthiness to be lowered.

So if we want to apply for a consolidation, cash or mortgage loan, let’s go to the bank first and give up the credit card and the bank account limit. In this case, the situation is completely different than in the absence of a credit history where it is advisable to set up a card in order to build a positive history in Credit Checker.

Pay off all loans

Each open financial liability decreases our creditworthiness. Let’s try to repay all current cash loans before you apply for a loan for the flat or for any purpose. We can overpay the remaining installments until the end of the loan agreement and close the loans or wait a few months until we pay the debt according to the current schedule.

If this is not possible, because we will not be able to repay the whole liability at once, and the loan is for a longer period (4-5 years), then let’s try to repay two installments at once for at least some time. Each dollar less to pay back increases our current creditworthiness.

Do not submit multiple loan applications at once

Do not submit multiple loan applications at once

Many people wanting to get a mortgage as soon as possible, at the same time applying for it in several different banks. This is an error, because each such application is visible in Credit Checker as a credit inquiry and causes the borrower’s point value to be underestimated (scoring in Credit Checker is lower). Act wisely. By using publicly available tools, such as loan comparers or calculators.

Choose 2-3 bank offers that suit you best and apply for them individually and in turn. Perhaps you will receive a positive credit decision already in the first bank and for further applications, you will not have to submit at all.

If you are interested in a loan, you should contact a loan broker who knows the applicable banking procedures, loan offers and the possibility of obtaining financing from a given bank. Often, the decision is negotiated at the decision-making level, which is why the client has no unnecessary queries in the Credit Checker.

Pay all your obligations on time

Pay all your obligations on time

It is not only about loan installments or shopping installments that you are currently paying off, but also gas, electricity, apartment, telephone, Internet bills and even parking tickets or free-riding trams. Any overdue payment will spoil your credit history in a Credit Checker or is recorded negatively in BIG. This will adversely affect your credit standing. The matter will get even more complicated if you hit the list of debtors in KRD. Keep your finger on the pulse and avoid such situations.

Check your data in the Credit Checker.

Unfortunately, there are delays and mistakes everywhere, also in the Credit Information Bureau register. So before applying for a housing loan, it is worth registering on the Credit Checker.pl website and download the “Credit Checker report”.

It may happen that an institution from which we once borrowed money entered incorrect data or that the bank loan we repaid long ago was not closed in the register (some banks and financial institutions update their clients’ data quite slowly). Let’s make sure that the information about us is true and current.

Credit history – a mirror of your business

It’s no secret that credit history is one of the key factors in determining whether a financing institution will lend a company. However, how many small and medium-sized businesses in Lithuania have work obligation schedules that check their creditworthiness every few months?

Dr. Gerda, Head of Sales and Customer Services at Good Finance, points out that credit history can also be a tool that will allow the company to earn points and a hurdle that will take time and motivation to overcome.

Knows but doesn’t know

money

Your company’s credit history is not only important on the eve of the day you are scheduled to meet at the bank. Most business people say this is a matter of course, but the results of the surveys cast doubt on it.

For example, a recent survey of ComRes, a research and communications company in the UK, found that only 13% of their executives know what components make up a company’s credit history.

Executives also revealed that more than half (59%) of companies have never checked their creditworthiness, while 56% of those who have inquired at least once have not done so in the last six months.

The facts alone

The facts alone

If we sometimes do business plans and market forecasts based not only on economic trends but also on sentiment, it is important to understand that when it comes to credit history, it is all about facts: what happened, what decisions you made, and how you kept your promises.

Dr. JurkonienÄ— emphasizes that the company’s credit history is like a mirror, which allows to see the financial habits of each company and assess its ability to deal with them.

“Credit history consists of two components: information about financial liabilities (company loans, leasing agreements, etc.) and information about payment history. The second part is no less important and shows whether the company is properly fulfilling and fulfilling its financial and other obligations – payments for loans, leasing, bills for services and so on.

A company’s credit report consists of credit rating, financial ratios, credit history, information about the manager, the board, the supervisory board, public procurement, liens and more. The credit report compiled by the credit bureau contains data collected from banks, leasing companies, other private institutions and public registers, ”explains dr. Jurkoniene.

Serious argument

Serious argument

Credit history is a tool for everyday business relationships, starting with deciding whether to start a collaboration at all, what grace terms and limits apply.

“Good credit history is an argument in negotiating business loan terms, paying off goods over time, and seeking higher credit lines from suppliers,” the expert says.

Banks and other financial institutions also take credit history into account when assessing potential business customers, which becomes an important piece of evidence for a company’s financial health.

“Financial institutions tend to trust those businesses that have a positive credit history. Such companies are usually offered more favorable financing terms, such as lower margins or lower collateral. When assessing a company’s credit history, the bank considers whether overdue debts are one-off or recurring, their duration, the impact they may have on the future performance of the company, or whether there are no legal proceedings for overdue debts. Jurkoniene.

What matters is what you do now

What matters is what you do now

And what if you have failed to avoid mistakes in the past or to make ill-advised decisions that have damaged your financial image? Credit history cannot be deleted, and small and medium-sized businesses must keep an eye on it.

“Financial liabilities do not deteriorate credit history by themselves if they are adequate for income and payments are made on time. However, poor credit history can really put a strain on future development, partnership or business plans in general. Poor credit history cannot be deleted or repaired cosmetically – it is an objective biography of your business that reflects what has happened.

However, this does not mean that the past determines the future – credit history can be enriched with as many positive actions as possible. If your financial health is limping, the key is to cover your current delays. Credit history not only reflects overdue credit payments, but also delays in paying supplier bills, leasing fees, bills for communications, internet, electricity, utilities or other services and goods.

Therefore, having unpaid debts should be covered as soon as possible. You should also evaluate your financial ability objectively and, if necessary, reduce your borrowing appetite. It is especially important not to cover existing credit with new loans, ”he advises. p Jurkoniene.

Tax deduction of a loan

The legislator provides for tax provisions that make it possible to reduce the burden of a mortgage loan. There is a difference between the gross burden of a mortgage loan and the net amount that you will ultimately spend on it. It is important to bear in mind that you must meet the conditions to be eligible for the deduction.

Note: The deduction does not mean that you pay less interest or repayment! You pay less tax, so the net costs are lower.

 

Changes as of January 1, 2005

bank loan

Since January 1, 2005, the rules regarding the tax deduction have been greatly simplified. Old loans and refinancing will in many cases still fall under the old rules. Under the new scheme, both the interest, the capital repayments and any debt balance premiums fall under the tax deduction. There is a maximum amount of $ 1,500 per person per year. The amount is indexed annually and if there are three or more dependent children, it is possible to have the maximum amount to be deducted increased. In this way the government makes it easier to purchase a home.

 

Conditions for deduction

loan deduction

In order to be eligible for the tax deduction of the costs for the loan, you must meet two conditions. It must first of all be a mortgage loan that is taken out with a European institution. The term of the loan must be at least 10 years, although this will usually not be a problem with a mortgage loan. In addition, the loan must have been taken out to acquire a home or be able to retain it and this must be the only home of the taxpayer on 31 December of the year in which the loan was taken out.

 

Debt balance insurance

Debt balance insurance

In the case of a balance insurance, the premiums can generally also be deducted. However, keep in mind that additional conditions are set with regard to this insurance. That is something your mortgage lender can tell you more about.

The tax deduction possibilities only apply to mortgage loans, since other loans (such as consumer loans) do not meet the first condition. In addition, keep in mind that you need to have the amount available monthly to pay your interest and any repayment and you will only benefit when paying the taxes.