Personal Loans. What Factors to Evaluate Before Requesting them

Lawyer and journalist, Massimiliano Dona is Secretary General of the National Consumers Union , the first Italian consumer protection association.

For his commitment to consumers, he was awarded in 2013 the honorific Commendatore to the merit of the Italian Republic. He is a member of the National Council of Consumers and Users (CNCU) at the Ministry of Economic Development and, by government appointment, Italian representative in the Consumer Consultative Group at the European Commission (ECCG).

It has always been defeated for the introduction of the class-action in Italy, supporting the first legal action taken in court by the Court of Naples in 2013.

He is the author of numerous essays and collaborates with the University of Roma Tre.

Data in hand

Data in hand

1. Let’s start with the numbers. The results of the latest analysis conducted by the Crif Barometer reveal that between January and September 2015, requests for loans requested by Italian households increased by + 7.6% compared to the same period in 2014. The positive trend seems to be the result above all the increase in requests for loans for the purchase of goods and services. How this data interprets.

After a long period of crisis, and therefore of the collapse of the requests, it is natural that there is a resumption of the number of operations. We therefore have few reasons for satisfaction, but only the hope of changing the trend.

2. Despite the trend just mentioned, according to the Abi report in the first seven months of 2015, loans granted for the purchase of a house have increased by 82% compared to the same period in 2014. It therefore remains the house of ownership, according to you, the first objective of the families that resort to the system of personal loans or the socio-economic situation of the country has stimulated a change of course?

I do not think we are facing a significant change of course: the high percentage of increase on loans granted for the home is only partly attributable to purchase transactions, but mainly is due to the subrogations. Consumers have tried to renegotiate the terms of their mortgage loans to benefit from the highly advantageous current conditions.

The citizen’s requirements

The citizen

3. What are the factors that must be considered when deciding to apply for a personal loan?

A personal loan can be requested by anyone between the ages of 18 and 75.

When you decide to apply for a loan, you need to be aware of the conditions offered by the bank or the financial institution you are targeting. It is important to obtain a detailed estimate of the costs to be incurred, with the indication of the proposed rates and the commissions requested; in this way a comparison can be made.

It is essential to contact primary subjects operating in the market and be aware that in the event of late payment of installments, the recovery of debt collection companies is at risk.

It is therefore important to pay attention to the deadlines and to make payments by means of a bank counter, avoiding the use of a postal bulletin which, often, causes delays and therefore interests in arrears. It is often impossible to choose the credit interlocutor, because when buying certain goods the seller already has an agreement with a financial company. In this case it is good to ask for the details of the costs in order to check the progress of the loan.

4. Income, financial reliability, type of employment contract. These are some of the requirements that the applicant must possess in order to obtain financing. Can you explain it in detail? What other features would you add?

To obtain a positive response from the bank, the applicant must possess certain requirements: he must have an income, that is the set of monetary income of a natural person in a given period of time; financial reliability that corresponds to the real repayment capacity that takes into account all monthly payment commitments. This “reimbursement capacity” must be demonstrable through the presentation of the paycheck in the case of an employee, the declaration of income in the case of self-employed person and the pension slip for pensioners.

In the event that you do not have the opportunity to prove your “ability to repay”, you may be asked for the personal guarantee of a third party who pledges to pay in case of default by the applicant. The credit institutions assess the reliability through the consultation of the databases and through the applicant’s installment-income ratio.

And if the personal loan application meets obstacles…

And if the personal loan application meets obstacles ...

5. Citizens interested in obtaining a personal loan may find themselves faced with certain obstacles, often difficult to break down. What are the most frequent causes of non-concession by credit institutions?

The most frequent causes of non-issuance of personal loans by credit institutions often occur when the documentation shows a sufficient “reimbursement capacity” of the applicant.

This happens when the applicant already has other financing contracts that, in addition to the loan requested, would commit over one third of the income. This limit is set to avoid over-indebtedness. It can also be refused if the applicant has suffered protests in the past and / or evidence of missed payments relating to loans previously obtained.

To assess the real “repayment capacity” of the applicant, the lenders can consult private databases or the Central Bank of Italy.

6. Is it possible to request a loan again after a refusal? How much time do you need to pass?

The credit institution that has refused the loan is obliged to report the negative outcome of the file to the Crif database. Only after 30 days from the notification will it be possible to request it again because after one month it is automatically deleted from the database. Furthermore, a new loan can be requested if the economic situation of the applicant has changed.

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