What to do before arranging a loan

The loan navigator provides information and comparison of loan offers on the Czech market. We independently compare not only the bank but also non-bank loans and institutions.

Our goal is to responsibly inform potential borrowers, point out the advantages and disadvantages of individual offers and offer recommendations for the right choice of loan.

We want to highlight unfair practices and help people avoid lending from troubled providers. On the contrary, we want to pick up the fair ones and direct the loan applicants to them.

What to do before arranging a loan

What to do before arranging a loan

Getting a loan is a big thing that is not worth underestimating. Therefore, the negotiation itself should precede obtaining as much information as possible about individual offers. The Credit Navigator seeks to do this.

First, it is necessary to choose a lender – a banking or non-banking institution.

Banking institutions

Banks are a standard lender. Banks receive a banking license from the Czech National Bank and are monitored by this institution – making them reliable lenders. As a rule, it offers the lowest interest rates for loans and mortgages.

On the other hand, banks are relatively strict in dealing with applications. To qualify for a loan, candidates must recognize it as a “creditworthy” client. Creditworthiness expresses the ability to repay the loan.

The current level of income and financial history intertwine most in creditworthiness. If the income of the bank is not sufficient for monthly installments or if the candidate has previously had problems with the installments, or has already had debts elsewhere, the bank will probably not grant the loan.

You can read more about bank loans and individual offers in the loans and loans section.

Banking institutions are a standard and reliable lender. But the loan from nothing may not reach everyone.

At the same time, the entire process of evaluating and checking the debtor’s register can take weeks. Therefore, when it is necessary to pay a higher sum of money, a bank loan is not an option horizon.

In such cases, most people look for non-banking institutions.

Non-banking institutions

Non-banking institutions

Most borrowers who have failed with a classic bank will seek the services of a non-banking organization. It is important not to forget this fact because it is the relationship of non-banking institutions to their customers.

Most non-banking institutions will be much more relaxed in arranging loans. They will also be faster, a quick loan or an SMS loan can arrive at your bank account in minutes after sending the application.

On the other hand, non-bank loans come with their disadvantages. At first glance, it differs most from high-interest bank loans. Interest may be only a few percents higher, but it may also be many times higher.

Rather than comparing interest, it pays to compare the APR – the annual percentage rate of charge. The APR is intertwined with all the fees associated with the loan. This is also another disadvantage of non-bank loans – high and frequent fees.

The APRC can climb up to thousands of percent for some quick loans. For ordinary non-bank loans should not exceed tens of percent.

As mentioned above, non-banking institutions are aware of the situation in which most of their clients are – ie they have no other choice. Therefore, they try to simplify the process of obtaining credit as much as possible. Often it offers free signing and arranging from home – either online or in-person by inviting a non-banking company representative to your home.

Although “friendly” coercion may be the most severe, one should never be afraid to refuse to sign a contract if something has not seemed to be the case and to keep looking.

You can view individual offers of non-bank loans in our non-bank loans section. Here you can read information about individual offers and types of non-bank loans and choose the right one.

If you already have debts, you may want to apply for debt consolidation. Consolidation is offered by banking and non-banking institutions. All the debts that a person has been taken up and made into one big loan. This will save the customer on the interest they would have to pay for each loan separately. More about consolidations and individual offers in the consolidation section.

Necessary information for choosing the right loan

Necessary information for choosing the right loan

In order to be able to make the right decision for a loan applicant and not cause problems in the future, he should obtain as much information as possible about:

  1. the lender,
  2. the price of the loan (interest rate and fees),
  3. loan duration (loan maturity),
  4. risk (for example, increasing the variable interest rate),
  5. reinsurance,
  6. consequences in case of default.

A prerequisite for responsible borrowing of money is good financial awareness, as financially educated clients usually better understand their financial situation and therefore evaluate which offer is best for them. Quite known is the case where the loan of 32 thousand crowns has become a debt of 138 thousand, while the conditions were absolutely fair. Reading credit conditions, repaying timely and orderly, and addressing any problems immediately can prevent similar situations.

Unfortunately, the level of financial literacy in the Czech Republic is very low. Few loan applicants behave according to these points. This is used by entities offering easily obtainable loans without verifying their ability to repay. As a rule, the debtor only becomes aware of them when he first opens the contract and read what he actually signed. But it is already too late at this point.