What you need to know before applying for a loan

Are you wondering why you should do a loan?

Applying for a loan can be the solution if you want to support an expense for the home and family but do not have the entire sum immediately available or if you prefer not to affect your savings.

You can apply for a loan in the form of a personal loan to pay for bond goods and services, such as cars, furniture, technology, studies, dental care, home renovations, etc. A loan of this type can also be requested to have cash available, but it cannot be used for professional needs.

Another type of loan that you can apply for is a mortgage. This is a medium-long term credit, for higher amounts than the personal loan, intended specifically for the home: to buy it, build it, renovate it or improve its energy efficiency.

In any case, whether it is a loan or a mortgage, the loan works similarly: you receive a sum of money and in exchange, you undertake to repay it in installments within a certain period. The installments that you repay are made up of a share of capital, that is the amount of the loan, and a share of interest, that is the cost of the loan, which rewards the bank or financial company that provided it.

Who can apply for a loan? Anyone can apply for a loan or a mortgage, as long as the conditions are in place for the amount financed to be repaid. Therefore, before granting the loan, the bank checks your creditworthiness and asks for guarantees. Creditworthiness is, in practice, the reliability that comes from a certain income that presenting documents, for example, the slip of salary if you work as an employee, your tax return if you are a freelancer, the only certification if you’re retired. For creditworthiness, the information that the bank searches in special archives, such as the Central Credit Register of the Bank of Italy, which collects data on loans already obtained, also applies., including late or unpaid installments, and any refused loans.

Why is a loan refused? Given that the bank must always justify its rejection, a loan can be denied for various reasons: for example if the repayment installment weighs more than a third on the monthly income; if there are other loans in progress, including with other banks or financial institutions, and over-indebtedness may occur; if the credit databases report a recent rejection.

Finally, one last thing to know about the loan is that to grant it, the bank asks for extra guarantees in addition to the certainty of income from work or retirement: for the mortgage, it is usually the mortgage on the house, while for the personal loan it could be the commitment of a third person as a guarantor.