Insurance loan – is it worth it?

We insure your home, car and our loved ones when they go on holiday abroad. Few people think about such things as credit insurance until the bank itself does not force us to buy such a policy. The question is what is credit insurance, is it mandatory and does it make any sense to buy it?

Credit insurance what is it?

Credit insurance what is it?

Credit insurance is one of the most commonly used forms of debt repayment security. It can become extremely useful when you find yourself in a difficult financial situation (e.g. you lose your job or health), or when you run out and your family has to deal with repayment of the remaining part of the loan. In the past, bills of exchange, sureties, and pledges played a similar role.

A loan with insurance is most often offered to people whose financial situation is unstable or their debt is taken for a very long period (e.g. in the case of a mortgage).

The insured loan is primarily to give a sense of security not only to the debtor but also to the bank – he is guaranteed that in the event of a specific event, the insurer will repay the remaining part of the debt on behalf of his client.

Does credit insurance have to be mandatory?

Does credit insurance have to be mandatory?

The bank has the right to require us to take out insurance when we do not meet all the conditions to receive this loan. An example is the low own contribution – banks often agree to grant loans to people who have not been able to collect all the amount needed, but in exchange for the risk incurred, the client must buy additional collateral.

Therefore, the question of whether to take out a loan with insurance should be answered by the customer himself, and the bank cannot force him to do it.

The loan offer is often constructed in such a way that it would not be profitable for the customer to contract without insurance. In this case, the bank usually imposes a higher margin or commission.

Cash loan insurance

Cash loan with insurance is definitely less common than, for example, insurance with a mortgage loan. This is mainly due to the length of the period for which the commitment is made. In the case of cash loans, it is usually up to 5 years, while for mortgage loans we talk about 20, 25 and sometimes even 30 years.

Banks are increasingly constructing two offers for one loan – with and without insurance. In most cases, a loan with compulsory insurance is promoted, which is usually much cheaper and has a lower interest rate

The customer can, of course, take advantage of the loan without insurance, but this involves additional fees.

How does cash loan insurance work?

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It really depends on which insurance you choose. There are three most common types of insurance:

  • Life insurance.

In the event of the borrower’s sudden death, the insurer repays the balance of the loan. He does so at the written request of the deceased’s family or bank and after presenting the necessary documents confirming the borrower’s death (e.g. death certificate).

  • Insurance against illness or permanent disability.

The insurer repays the remainder of the loan if the borrower suffers a permanent bodily injury that prevents him from continuing to work. The liability is repaid only after the borrower submits a written application, together with documents confirming invalidity.

  • Insurance against job loss.

The loan is repaid if the borrower loses his job, but not because of him. Then the insurer does not pay the entire remaining amount, only 6 or 12 subsequent installments. To pay the insurance you will need documents that confirm the termination of employment, e.g. a work certificate.

 

Credit promise – what does it mean and what does it mean?

Simply put, a promise is a document confirming the commitment to perform a specific action. In this case, it is the bank’s official promise to grant us a loan for the amount requested. It then takes the form of a written certificate, which has the seal of the bank where we want to make a commitment.

What is a loan promise?

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Therefore, the basic purpose of a credit promise is to confirm the creditworthiness of the consumer. If we want to buy a property using a mortgage, the seller has the right to ask us to extend the promise.

Thanks to such a procedure, he will not lose valuable time for the client, who the bank may refuse to grant a housing loan for some reason, as a result of which a specific investment will not be purchased.

If we are planning to buy real estate, it is worth going to the bank to calculate our creditworthiness and give us a promise. With such an official certificate, it will be much easier for us to find a seller who is willing to sign a contract knowing that we are able to repay this contract, we have cash or we have at least a promise.

How much does the credit promise cost us?

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A few years ago, the promise of credit was treated as a rare form that only distrustful and sensitive customers of the bank asked for. In such situations, the cost of this document ranged from 50 to 300 USD. The fee was charged primarily for the time that analysts devoted to thoroughly analyzing the application.

Fortunately, the modern credit market has completely different laws. What has changed the most is probably customer service standards, which have increased significantly. Additionally, access to databases such as the Credit Information Bureau or KRD Register has been simplified.

Thanks to such possibilities, analyzing a loan application is a less time-consuming process than it was a few years ago. The promise of credit is currently used as the basic element of documentation made available to clients. Most banks in Poland do not charge fees for issuing it.

Credit institutions like this solution best, because it is the free issue of such certificates by banks that is the only way to get new borrowers.

Does the promise guarantee us a loan?

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Unfortunately, we can often find the situation when the bank promise issued by the bank turns out to be incomplete.

Such accidents are extremely undesirable both by the seller of the apartment, who demanded confirmation of the consumer’s creditworthiness, and by the potential borrower, who believed that the bank would grant him a mortgage and paid a non-refundable deposit. For this reason, it is worth being aware that the promise of a loan is not a guarantee of obtaining a loan for an apartment!

When does the promise turn out to be non-binding?

There can be many such reasons, however the most frequently noted include:

  • Change in the financial situation of the borrower.
  • The appearance of new (negative) information about the borrower in KRD, BIK or BIG.
  • Introduction of new legal regulations for banking institutions.
  • Refusal to grant a loan for a specific property.

One hundred percent certainty about granting a housing loan is given to us only by a positive credit decision. A promise is a document whose purpose is to temporarily confirm the customer’s creditworthiness to pay a specific amount of liability.

Which banking institutions will promise us?

Which banking institutions will promise us?

Most banks on the Polish market grant a housing loan promise. Today, it is often crucial to get a preliminary decision on the customer’s creditworthiness. The reason for this is the change in the housing market, where sellers have significantly increased the level of security when selling their property.

Almost each of them requires confirmation of the possibility of paying back their investment, if only to check if it is worth entering into a contract with a given buyer. Some banks issue a promise of credit not to a specific property, but to a specific loan amount.

Credit analysts estimate if a given customer will be able to afford real estate worth 500,000 USD. such promises are issued faster, however, they are often unspecified as to the specific property, and thus – unreliable.

However, some banks issue full promises, which confirm the granting of a loan for the purchase of a specific property. To obtain it, you must provide all necessary documents regarding the property you are buying. Such a promise is more difficult to access but reliable.

Contents of the credit promise – what does it contain?

The binding nature of the promise depends mainly on the detailed content of the document. If it contains only information about the client’s ability and the type of credit he can count on, unfortunately it can be a non-binding declaration. Therefore, such promises are treated as estimates.

On the other hand, if the loan promise is accompanied by any documentation regarding the property, including the area, market information, specific price and entry in the land and mortgage register, the bank will not be able to withdraw in such a situation.

What to do if you do not get a promise for a loan?

The most important is to thoroughly analyze your financial options. When we know that we are not able to deal with regular payments, e.g. for bills, it is not worth it, and you should not even apply for a high loan, so that you do not cause unnecessary problems afterwards.

However, if we are sure of our financial credibility, it is worth making a reliable valuation of the property that we want to purchase.

If for some reason the bank does not want to sign a loan promise, the customer does not have to wring his hands and give up further attempts. Financial specialists recommend, however, applying for a credit decision, and not making further requests for a promise.

A good solution will also be to make an advance payment for the purchase of real estate, because if you do not grant a loan from the selected bank, the amount will be returned to us. This entry should be included in the clause of the document confirming our payment.

Is it worth fighting for another USD 100 loan?

I have never been a cherry hitter. I didn’t go for every bank promotion to take advantage of a cash bonus or gadget (e.g. power bank or smartphone) and whenever possible, give up my credit card, close my account and look for another opportunity.

On the other hand, it is also difficult to include me among the bank customers who are loyal to one institution from the first job to the grave board. On the contrary, I have changed my personal accounts (and the banks that run them) several times.

Now I have decided once again that you need to change the account bank. As always, I started searching from comparison websites.

Checking dozens of accounts

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After some time (and checking dozens of accounts) I already had a shortlist of banks that particularly interest me. Looking more closely at them, I noticed that some of them are carrying out promotional campaigns in which people who set up a personal account offer a cash bonus.

Or maybe you could earn something more by changing your account? – I thought. Immediately, however, a second thought occurred to me: is it worth it?

One can say that of course, because USD 100 is not a road. The thing is not how much you can earn, but what you need to do to get the bonus. Why? For a simple reason: the bonus is paid out a few months after the account was created.

During this time, the account must not be fallow – the banks speak outright, reward those customers who either top up the account with a certain amount, make a debit card transaction for a certain amount, or meet another (usually easy) requirement. How does this work in practice? I will show on the example of two promotions:

Good Finance and Account Worth Recommending Honest Bank. The first will last for several months, and the second has just ended.

USD 100 for USD 1,000

USD 100 for USD 1,000

Persons who between July 2015 and November 2016 did not have or were not co-owners of any of the Direct, Comfort, Premium, Classic, Student personal accounts can participate in the promotion, under which the bank pays USD 100 bonus.

However, the stake is not paid immediately after opening the account (this is the first condition for receiving the prize).

The second condition is patience – the bonus will be paid until the end of July 2017, and the third – activity. Before the bonus payment date (specifically until the end of June 2017), you must use a debit card issued to a Direct Account or Comfort Account to make non-cash transactions for at least USD 1,000.

What do we get in return? Free (and unconditionally) account, with free internet transfers, the possibility of earning at tips, a good mobile banking application and a fairly decent interest-bearing savings account (2% per annum).

The bonus will be transferred to the savings account. Minuses? There are two. The first is the charge for a debit card, which is not charged if you use it to make monthly cashless transactions for at least USD 300 (otherwise the bank will charge USD 7). The second – slightly larger caliber – are the costs of withdrawals from ATMs.

We will withdraw cash for free from Good Finance and from Honest Bank network devices. For withdrawals from other devices, only the first transaction of the month is free, and each subsequent one costs USD 2.50.

Honest Bank, i.e. fund your account, and USD 100 will be given to you

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The promotion at Good Finance ended on November 30. There was also 100 USD to take. However, the conditions to be met were slightly different.

During the promotion period, it was necessary (obviously) to set up an account with Visa card and electronic banking services Cooperative Banking, and in December and January to provide income (at least USD 1,000 per month).

By February 20, you need to check that the bonus has been awarded to us, and by February 27, complete your account number in the space provided. The bonus will be paid out by March 10, 2017.

What in return? First of all, a free personal account with an interest rate (this is a rarity) of 4 percent. per year (it’s already a real white crow). Internet transfers and Visa cards are also free (also unconditionally).

A spoon of tar in a barrel of honey? Yes it is. It is a commission for withdrawals from ATMs other than those belonging to Honest Bank and Good Finance, it is 3 percent. transaction value, a minimum 5 USD.

Is it worth fighting for USD 100?

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As the examples above show, if you want to get a USD 100 bonus from a bank, you have to earn it. It is clear. After all, banks care about active clients who at least regularly fund their accounts with receipts and use the card.

It should also be remembered that by participating in the promotion, we agree to its terms. For example, a Visa card is assigned to a Promotional Account Worth Recommending.

Its advantage is that there is no charge for using it, and the disadvantage is that we will pay a commission for withdrawals from ATMs other than those belonging to the bank and Good Finance network. A Good Finance card is also offered for this account. It costs USD 7 a month, but withdrawals from all ATMs in Poland using it are free.

And we can’t always spend time finding a free ATM. Sometimes, we have to urgently withdraw, and there is no free ATM in the area. For example, paying out e.g. USD 300 with a Visa card once, we will pay up to USD 15 commission. You can find more examples like this.

Thus, the bank bonus should not be the most important factor on which we decide to make use of a given offer. We should treat USD 100 as a nice addition and something that will finally convince us to choose this particular account.

If, however, you plan to close the account after receiving the bonus and you do not want to use it actively, then you should consider whether the skin is worth the layette, or otherwise – whether the costs will be greater than profits. I changed my account. I hope it was a profitable decision.

Cash loan refinancing – how do you transfer a cash loan to another bank?

The decision to take a cash loan is often made under the pressure of quick access to additional money. Unfortunately, in such situations, we often choose not the cheapest, but the most easily available cash loans.

Such offers can significantly exceed the borrower’s household budget every month. It is worth considering refinancing your loan. What is it about and what conditions must be met in this case?

Credit refinancing – what is it?

Credit refinancing - what is it?

Poles willingly use consumer loans, including cash loans, for the implementation of various plans and investments. The Credit Information Bureau reports that in May 2019, banks and cooperative savings and credit unions granted consumer loans in the amount of USD 7.786 billion.

Compared to May 2018, lending institutions granted significantly higher limits on credit cards – the increase is estimated at 27.6 percent. There were also more consumer loans – their value increased year-on-year by 8.9 percent.

It follows that we are eager to take out cash loans. Often, a cash loan is an alternative to mortgages, for example when the customer wants to renovate the house or flat without completing the mortgage or finish the construction.

However, whenever you take a cash loan, it’s worth spending time analyzing all elements of the loan offer and choosing the best one possible. But even when we do it, it may happen that after a few months of paying off loan installments, there will be much more interesting consumer loan offers on the market. You may then be interested in refinancing your cash loan.

If the customer is not satisfied with the loan he has taken and knows that he is paying over each installment, it is worth looking for an alternative solution, which can be refinancing a cash loan. Most often refinancing concerns mortgage loans, but it is also possible to use it for cash loans. This will reduce the monthly fees for the repayment of financial liability.

Refinancing a loan is nothing but transferring your cash loan to another bank, which has many advantages. First of all, thanks to this you can reduce your monthly loan installment. You can find current offers of the best cash loans in our ranking.

Refinancing will also prove beneficial if the customer has to pay an inadequately high margin for the loan. The reason for changing the lender may also be other factors, such as low quality of service or negotiations on lowering the installment that has been refused.

Can you refinance any cash loan?

Can you refinance any cash loan?

Not every cash loan can be converted into a refinancing loan. This is not a popular operation, unlike mortgage refinancing. The final decision whether a bank decides to refinance a cash loan depends on the individual criteria recognized by the bankers.

The best solution will be to choose several attractive refinancing loan offers and send banks inquiries about the possibility of refinancing a cash loan. Our free calculator will definitely help you calculate your monthly installments.

How do you transfer a cash loan to another bank?

In fact, the transfer of a cash loan to another bank involves early repayment of the liability at the current bank and continuing its repayment at another financial institution. From the technical side, the matter is not complicated.

The new lender provides financing to the client who repays the current, unwanted loan. This money is used to pay back the loan in advance. The liability itself is transferred to another bank mainly to pay less under each principal and interest installment and to pay less credit costs in total. However, this is not always the case, which can be a loan refinancing trap.

Actually, cash loans can be transferred to other banks in two ways:

  • through a consolidation loan, which will allow you to get extra cash;
  • by taking a new, cheaper cash loan at the selected bank for refinancing.

In practice, refinancing a cash loan will require the customer to apply for consolidation or financial loan at the bank that currently has the best loan offer.

The transfer requires the simultaneous repayment of a previous loan at another bank. The repayment operation is carried out by a new creditor for the benefit of the previous one.

In what situations is it worth transferring a cash loan to another bank?

In what situations is it worth transferring a cash loan to another bank?

There are many reasons that will justify refinancing your cash loan. The main goal here will be to reduce the cost of lending, among others by lowering the interest rate on cash loans.

Customers wondering when it pays to transfer a cash loan to another bank and use refinancing should know that it is worth doing it when:

  • the monthly burden of repaid capital and interest installments is too high for us, and the bank does not want to negotiate with the borrower the existing conditions, including bank margin amount;
  • the borrower pays interest on the loan calculated according to the bank’s extremely high margin, which is disproportionate to the margins applicable in other banks;
  • the interest rate of the cash loan being repaid at present is much higher than the interest rate on the loan offers that interest the client ;
  • the level of customer service at the current bank leaves a lot to be desired.

Whenever loan conditions in many banks change in favor of customers, e.g. as a result of record-low interest rates occurring in the country, you can either negotiate the terms of the previously repaid cash loan or decide on its favorable refinancing.