Framework loans and their use

When it comes to increasing the financial scope without directly taking out an installment loan, framework loans are the first choice. They are offered in all forms by all banks. see for more notes

  • The most commonly used credit line is the overdraft facility, which banks grant their customers either automatically or upon request to a certain amount.
  • As an alternative or in parallel to the overdraft facility, a demand credit can also be used, which has the advantage that it is not linked to the management of the checking account.
  • The third credit line, which is popular with many consumers, is the credit card credit of a revolving credit card, in which the card issuer allows the customer to use the credit card with the installment facility.

For consumers who regularly need more money at short notice than they have in their account, credit lines are an interesting way to be financially flexible and always be able to pay on time.

How is the framework credit defined?

How is the framework credit defined?

The credit line is a loan that has a fixed financial framework. Within this framework, the borrower is allowed to have money. Framework credit can be applied for as a credit facility with the account-holding bank. On-demand loans are only available from a few providers and revolving credit cards are available from some providers.

In order to be granted a credit line in one form or another, the customer must have an unobjectionable Credit bureau and proof of regular attachable income.

The amount of the framework loan depends on the income situation. When it comes to overdraft facilities, you can expect the banks to grant a credit line that is up to three net monthly incomes. The situation is similar for call credit and for credit card credit, the conditions depend on the card issuer. However, there is often no proof of income to be presented here.

Advantages and disadvantages of credit lines

Advantages and disadvantages of credit lines

Framework loans in one form or another make sense if, as a consumer, you are basically able to handle your finances properly. Framework loans require discipline and a sense of responsibility due to the flexible repayment modalities of borrowers. You can be financially flexible and use the money within the credit line or leave it.

Anyone who only uses the credit line for overdraft facilities and on-demand credit in such a way that it can be cleared at short notice does not pay as high interest. However, if the overdraft facility is used on a permanent basis, it is one of the most expensive loans, like the call credit and credit card loans. The average interest rate on overdraft facilities and credit card loans is well over 10 percent. In addition, the interest is not contractually fixed, but can be flexibly adjusted by the banks to market conditions.

Unfortunately, banks tend to forget to pass rate cuts on to consumers, but when interest rates rise, they are quick to charge higher rates when credit lines are used.

As long as credit lines are only approved as such on paper, they do not incur any costs. Costs are only incurred when used and then only for the amount used. With credit card credit, if the balance is settled by the set deadline, there is no interest. Framework loans, however, carry the risk, if they are used carelessly, that one will creep into the debt trap, because one is no longer able to easily balance the balance. If you notice this, you should alternatively take out an installment loan and thus balance the overdraft facility, the on-demand credit or the credit card.

It is recommended to consumers with the appropriate creditworthiness to get at least a framework credit such as the overdraft facility, simply to be financially flexible and to be able to pay unexpected expenses without having to take out an installment loan.

However, a revolving credit card is only recommended to a limited extent. In principle, when it comes to owning a credit card as a means of payment, a normal credit card, where the entire balance has to be balanced when billing, is completely sufficient.


How and where to take a loan wisely

Many people do without having to take out any loans. Unfortunately, not everyone can afford to live without the support of the bank. Therefore, basic knowledge about the use of credit products.

Financial intelligence should be taught in schools from an early age

Financial intelligence should be taught in schools from an early age

Then many people would avoid excessive debt and negative entries in Credit Information Bureau or National Debt Register databases.

Therefore, if we use financial instruments such as credit or loan, it is worth following the most important rules, so that the contracted obligation does not become a burdensome problem in the future.

To start with, you need to choose the right type of bank loan considering its purpose. If we are going to buy a car – the cheapest will be a car loan, if a flat or a construction plot, of course, a mortgage will be appropriate.

However, the most popular bank loan is a cash loan, due to the fact that it can be used for virtually anything. This is the solution, unfortunately, the most expensive.

Where is the best place to take a loan?

Where is the best place to take a loan?

To start with, it is worth asking about the offer the bank whose services we have been using for a long time (e.g. it runs our personal account, credit card). We can then count on more favorable one’s conditions such as a lower commission or reduced interest rate. Unfortunately, it is still a big mistake made by Poles to use only the services of a bank whose branch is closest to their place of residence.

In order to take a loan wisely, the amount of the monthly installment should be properly adjusted to our real financial possibilities. This condition must be absolutely fulfilled if we intend to repay the commitment made on time. If the installment turns out to be too high, we can extend the loan period instead of assuming that it will work out somehow.

Another very important issue is the accuracy of the information provided when applying for a loan. And not only those related to the place of employment and the amount of income obtained. Equally important is the information about our fixed costs such as rent, utilities, telephone, car maintenance costs, number of children, etc.

This data is also used by the lender to calculate creditworthiness. If they are incorrect, the bank will misjudge our debt repayment options. This can lead to problems with the timely payment of installments and the bank charging penalty interest.

Before you decide to take a bank loan, you should think about our future, even in the professional sphere. Permanent work today does not mean a reliable source of income in a few years. In addition, let’s predict the expenses ahead of us in the near future. Will we be able to afford them by paying the installment every month?


Housing loans also receive APR

Good news for comparing housing loans. From April 1, 2017, banks are legally required to bundle all costs into one annual cost percentage also on mortgage loans. Currently, the APR scheme only applies to consumer credit. The total costs of installment loans, such as personal loans, car loans and renovation loans, are easy to compare thanks to this APRC formula. And also with money reserves, credit cards and other credit openings you know in advance where you will pay the lowest or highest costs when you go below zero.


What will change with mortgage loans?

mortgage loans

Costs of home loans are not that easy to compare at the moment, because the institutions charge other costs in addition to interest, including file costs, estimation costs, guarantee costs and the costs of compulsory insurance. These are not uniform. For preparing a file alone, the costs at different banks can vary between $ 250 and $ 700. The rate for estimating the value of a home also varies. This means that a loan with a lower interest rate may turn out to be more expensive due to high additional costs. The borrower usually sees the additional costs only after the credit process has already started, or is sometimes not aware of it at all. Bankers are naturally useful in subtly presenting their costs.

As of April of the following year, the banks must include all their costs in the annual percentage rate. In addition to this APR, they may not charge any other costs. When comparing home loans from multiple financiers, in the future the consumer only needs to pay attention to the APR. A loan with a lower APR will automatically result in lower credit costs.


How can notary fees be compared?

home loan

When taking out a new mortgage loan and transferring (refinancing) an existing home loan to another bank, a notary comes into the picture. The government is in consultation with the Federation of the Belgian Notarial Profession to ensure that the notary fees are fully uniform. Now only the fees are bound by fixed percentages by Royal Decree. For the administration costs of a notary there are no mandatory calculation methods for the time being. A bank can offer higher, or lower, notary fees when a mortgage is handled within a total package. The next year the uniform administration rates must be available for notaries. For the consumer, this item may not be a factor when choosing a bank.