In Poland, relatively few people can afford to finance all their needs through cash. Serious expenses such as buying a better car, going on vacation, or a new computer are often financed with funds obtained thanks to loans. One of the most popular loans on the Polish financial market is cash loan. What is its popularity? Mainly because it’s relatively easy to get it. Compared to a mortgage or even a car, the formalities are really easy. An additional advantage of this loan is that in the process of applying for it, we do not have to inform the bank about what we are going to spend the acquired money on. The bank may also not request such information from us. What characterizes this type of loan? How do you find the cheapest cash loan? I will read about this in this article.
Characteristics of a cash loan
What is the characteristics of a cash loan? First of all, it is worth noting that loans can be granted only by banks. This is regulated by the provisions of the Banking Act. Banks’ lending policy is therefore subject to strict restrictions. In addition, the Polish Financial Supervision Authority also takes care of the banks, which ensures the proper functioning of the financial market in Poland. The PFSA often issues recommendations which banks are obliged to follow. In the face of such restrictions, banks’ lending policy is strictly regulated. The fact that banks impose a number of requirements on borrowers results directly from the provisions of the Act.
What costs are associated with a cash loan
The most important cost of a cash loan is interest. They result directly from the interest rate on the loan, which the bank provides on an annual basis. It is worth noting what the maximum amount of such interest may be, which we call nominal. Well, it cannot exceed four times the pawnshop rate. The amount of this rate is determined by the National Bank of Poland. There are two types of loan interest rate: fixed and variable.
In the case of fixed interest, it has the same amount throughout the loan period. It is usually used for short-term loans. Floating interest consists of a fixed part, i.e. a margin, and a variable part. This second part is subject to change depending on which reference point we will calculate. Most often, this reference point is WIBOR. This is nothing more than the interest rate on the interbank market, which is constantly changing. Everything also depends on the level of interest rates set by the Monetary Policy Council.
Which interest rate is better. From today’s perspective, many specialists will say that the interest rate is definitely variable. This is primarily due to low interest rates. At present, a fixed-rate loan is simply too expensive and unprofitable. But this is not entirely true. Much depends on the loan period. One should look at the cost of credit from the perspective of the entire duration of the loan agreement. If we take a long-term loan, say for 8-10 years, then one should consider whether a fixed interest rate would be a better option. In such a large time perspective it may turn out that interest rates, and hence – interest rates on loans will increase. Then it may turn out that today a loan with a fixed interest rate will be relatively cheap in the long run.
The cheapest cash loan
How do you find the cheapest cash loan? To do this you need to analyze the credit offers in terms of APRC parameter. THIS IS THE ACTUAL ANNUAL INTEREST RATE, which banks calculate according to the same principles that are enshrined in the Consumer Credit Act. Thanks to the uniform calculation method of APRC, it is a good tool that will allow us to make a reliable comparison of loan offers.
APRC is given in percentage. It perfectly illustrates the relationship between the total cost of credit and the sum of money borrowed. This parameter includes nominal interest, commission, margin or preparation fee. However, you must know that in the case of variable interest rates, if the level of interest rates increases significantly, the cost of credit may increase.
For many borrowers, it is not the cost of the loan that matters but the amount of the monthly installment. That is why they often prefer long-term loans where costs increase, but installments can be set at a satisfactory level. Credit installments can be equal and decreasing. The latter option is definitely the most advantageous for borrowers. We pay the interest that is included in the installment on the outstanding capital.