Creditworthiness – how to calculate?

In the case of loans, the calculation of capacity is based on several factors. First of all, we calculate stable income most often based on recent months depending on the form of employment. In the case of an employment contract, it is usually 3 months and we document these earnings on the basis of a certificate from the employer or receipts to the bank account.

Contracts for specific work or orders are usually the average for 3.6 or 12 months documented by account receipts, contracts with bills or based on PIT settlement. As for the business, depending on the form of settlement with the Tax Office, we can calculate in the next entry where I will try to present specific calculations (How to calculate net income for business). Retirement is one of the most stable incomes, therefore information about granting is enough to include it in the calculation of your ability.

How to calculate a stable income?

The creditworthiness of cash loans is very simple to calculate and you can usually do it on your “knee” except that these calculations will not always be reflected in reality. By converting your remuneration e.g. for 3 months as an average, we multiply the DTI factor by 50.

The amount received is the maximum installment of loans that we can pay with the fact that it is a simplified calculation that does not take into account additional parameters. To be more specific, it is necessary to assume maintenance costs, fixed fees (maintenance, company loans, permanent insurance, etc.) for these calculations.

if these 2 conditions are met then creditworthiness. As for the cost of living, there is no single formula and you need to get this information from an agent or bank. A new law has recently been introduced where the cost of living changes depending on the loan period, therefore costs are lower up to 60 months.

Above 60 months you have to take into account higher ones, and therefore with low wages or high fixed costs, the capacity drastically decreases. For example, earning USD 2,000 net and being alone without obligations we can get, for example, USD 50,000 for 60 months and only USD 40,000 for 120 months. Of course, this is just an example, however, such cases can happen.

Mortgages – What besides installments is counted?

Mortgages - What besides installments is counted?

At the moment, housing loans are very popular and it is influenced by the construction and economic boom. Countless developers and new investments that sell like hotcakes. However, is it so easy to get a loan for your own M2? The answer is yes and no. To calculate your ability, you need to use a scheme similar to those of cash loans, however, more complex because it is very difficult to assess for yourself whether you have the ability or not.

Virtually every bank has a calculator that is supposed to simplify the lives of employees and agents. The number of dependents is very important and is meticulously verified by banks by checking account statements or PIT attachments or receipts from 500+.

Private and company obligations are absolutely necessary for initial calculations, and the bank will check whether it is in accordance with the declared ones because it will download a Credit checker. In the case of household maintenance costs, the number of dependents mentioned above, as well as fixed fees and place of residence (the bank estimates the appropriate costs on this basis). There are also other variables included in the calculation, such as maintenance, leasing, company loans, etc.

Company loans – all income as an installment?

Company loans - all income as an installment?

As for corporate loans, the recommendation and DTI do not apply here, so when calculating a stable net income we subtract from it the costs of maintenance, installments of private and company loans (in the case of account and card limits we accept from 2 to 5% from the limit granted depending on the bank). The rest of what can be spent on installments of company products.

Therefore, when applying for a company loan, this ability is definitely higher than in the case of cash or mortgage. However, it should be remembered that, as in other products, capacity, such as alimony, leasing or other fixed costs, which I mentioned earlier, are accepted as burdens.

Banks usually accept their living costs, however, we usually have to declare some amount and if it is higher than the one in the table, the bank will take into account the higher one.

Take out life insurance with a loan

When you take out a loan, you undertake to repay the amount of money at a certain point in the future. Whether you start paying off immediately or prefer to wait a while, you must ultimately ensure that the borrowed money is repaid. Although you may prefer not to think about it, you may die in the meantime. You can take out insurance during the loan to ensure that your surviving dependents do not have to pay for the loan in that case.

 

The debt balance insurance

The debt balance insurance

One of the most common forms of insurance when taking out a loan is the debt balance insurance. You enter into an agreement with the insurance company that ensures that the remaining balance will be paid if you die prematurely. You can choose to have the amount still to be paid in one go, but it is also possible to have this done on the basis of an annual premium. Moreover, you are free to the extent that you are insured against the debt balance, which means that it is also possible to have part of the debt repaid by the insurer.

 

Mortgage loan

Mortgage loan

The debt balance insurance is generally made mandatory by the providers of a mortgage loan. As soon as you take out a mortgage, you incur a substantial debt, which must be repaid when you die prematurely. With the help of a balance insurance policy, you ensure that the insurance company will compensate the lender for the loss that is made possible. You therefore pay a premium when you take out a mortgage, which is intended to pay off any outstanding debts when you die.

 

The mixed life insurance policy

insurance loans

In addition, you can opt for a mixed life insurance policy, which will not only pay out in the event of your death. You can choose to have it paid out during the term of the loan when you die, but also to pay it out at the end of the term, even when you are still alive. You actually choose to take out a life insurance policy, which will also pay out when the loan is still running and you unfortunately die. It is wise to take a good look at the tax benefits of the various variants when you take out a loan.

Let’s see what to prepare to get a loan

Sometimes it is hard to cover the purchase of new machinery or land with your own savings. In this situation, it is worth applying for a loan for agricultural activity. Unfortunately, banks require farmers to provide a large number of documents to help assess creditworthiness.

Identity card or passport

bank

The basic document that you must present when applying for a loan for agricultural activity is an identity card. It can be an ID card or passport. Some of the banks require confirmation with two documents with a photo – then you can also use your driving license.

Document your income

Whether your bank grants you an agricultural loan depends on your creditworthiness. The basic factor that determines it is, of course, your income. Therefore, it is worth ensuring the best possible documentation. What can help with this? First of all, prepare agreements confirming ownership of agricultural land and possible leases.

In addition, it is worth having with you the current payment order for agricultural tax and its amount, and confirmation of its payment. You also need documents that will confirm the income obtained from agricultural activities. These can be lists, VAT invoices, certificates, and receipts.

Sometimes banks require the submission of bank account lists. It is worth mentioning that depending on the bank, you will need documents from the last few months or even from the entire previous year.

EU subsidies – how to present them

EU subsidies - how to present them

Farmers receive income not only in connection with their activity but also with EU subsidies received. If the farmer has this type of support, it is worth presenting it to the bank. It can significantly increase our credit standing.

What documents should be presented to the bank in relation to subsidies? First of all, they should be documents issued by the Office of the Poviat Agency for Restructuring and Modernization of Agriculture.

Importantly, it is worth presenting not only targeted subsidies that we have received, e.g. for the purchase of equipment, but also the amount of area payments, which can help us obtain a larger loan amount.

Investment loan – necessary plan presentation

Some farmers decide to take out an investment loan. In this case, it is necessary to collect a number of documents that will confirm the profitability of the investment. The bank may require the presentation of an investment plan containing all information on planned expenses and forecast profits. Sometimes it is also necessary to provide various types of cost estimates, certificates and permits.

To sum up, the farmer’s path to obtain a loan for agricultural activity is slightly more difficult than for private individuals wishing to take e.g. a cash loan. So many farmers decide to use the help of a financial adviser who will help us gather all the necessary documents.

Loan remission – what you need to know?

After taking the loan, we are usually satisfied because we were able to, for example, buy the dream apartment or electronic equipment. The excitement, however, quickly subsides, and after a while, the timely repayment of the commitment can become very difficult or even impossible, and not necessarily our fault.

In this case, we may be interested in the redemption of the loan (including, inter alia, the redemption of the student loan or the redemption of the housing loan), which seems to be a godsend. What do you need to know about this process?

Bank debt forgiveness – is it possible?

Bank debt forgiveness - is it possible?

The bank may or may not cancel part or even part of the loan debt – but it depends only on its goodwill. It would seem, therefore, that it is impossible to write off a bank debt – after all, why would the bank agree to incur losses? In practice, however, there are situations in which you can actually count on at least partial write-off. Belong to them:

  • death of the spouse and, consequently, reduction of income;
  • permanent loss of work capacity;
  • serious illness, disability;
  • loss of property as a result of a disaster (fire, climate disaster).

Why can a bank be willing to reduce debt under certain circumstances? Debt collection and ultimately legal redress are burdensome, costly and lengthy. A solution is to sell the debt to a debt collection company, but in this way, you can recover only a small part of the debt.

Partially cancellation of bank debt to persons who find themselves in a very difficult situation and do not promise rapid improvement may paradoxically be beneficial for the bank. Lower debt means lower installments, and therefore easier repayment. Therefore, there is a much greater chance that the unredeemed part of the liability will be repaid and the bank will not be losing so badly.

The possibility of canceling a bank debt will be negatively affected by the fact that it has many other liabilities, as well as the assets at the debtor’s disposal. If the assets are large enough to collect a debt, it is unlikely that the loan application will be accepted.

Cancellation of the loan after the borrower’s death

bank

The liability entered into does not disappear or is automatically written off with the death of the borrower. Therefore, the obligation to pay it falls on the heirs of the deceased. If the inheritance is accepted with the benefit of inventory, debts will have to be repaid to the amount of inherited property. After accepting the inheritance directly, the heir is obliged to pay the entire liability, even if it exceeds the value of the inherited property.

Therefore, is it possible to redeem the loan after the borrower’s death? Yes, but only partly and, as already mentioned above, it depends on the goodwill of the bank. An exception is a student loan, which will be discussed in more detail later in this article.

The bank may agree to a partial write-off of the loan after the borrower’s death if the heirs are in a bad financial condition and unable to settle the liability and debt collection would be too expensive.

Partial redemption of a housing loan granted until May 31, 1992

money

The first housing loans granted after the political transformation since 1990 are sometimes called “old portfolio” loans. They were contracted primarily by housing cooperatives for the construction of residential premises and later repaid by tenants. Due to the hyperinflation prevailing at the time, these loans were extremely expensive and repayment proved extremely difficult.

This problem was solved by the state, allowing for the write-off of capitalized interest and indebtedness due to the temporary redemption of interest on a loan taken up to May 31, 1992, after 20 years of timely and regular repayment of the liability. On the one hand, it was a good solution, and on the other – it caused new difficulties as the canceled liability had to be indicated as revenue in the annual tax settlement.

People who could not afford to pay huge interest on the loan, in most cases would also not be able to pay the income tax on them. Therefore, in 2018, income from the cancellation of capitalized interest on a housing loan and the temporary redemption of income tax interest was released.

Redemption of student loans

Redemption of student loans

Student loans are often called the cheapest loans in Poland. It is impossible to disagree with this statement: it is not enough that repayment begins only 2 years after graduation, the interest is very low. The fact that the law allows for partial or even full redemption of a student loan can also be nice.

Partial cancellation of student loans is possible due to:

  • hard life situation;
  • graduation in the group of the best students.

A difficult life situation is interpreted in particular as:

  • loss of income by the borrower or his spouse, necessitating the use of social assistance benefits (e.g. unemployment benefits);
  • sustaining damage as a result of a natural disaster or fire;
  • illness of the borrower or a member of his family;
  • the need to care for a disabled or sick family member.

How much of the loan will be canceled due to a difficult life situation depends on individual circumstances.

Students who have completed their studies with very good results can also count on a partial write-off, regardless of their financial situation. You may redeem:

  • 20% credit – for a group of 5.01% to 10% of the best students;
  • 35% credit – for a group from 1.01% to 5% of the best students;
  • 50% credit – for a group of up to 1% of the best students.

The student loan may be completely canceled if:

  • borrower’s death;
  • permanent loss of repayment capacity;
  • lack of legal possibility of pursuing claims.

Lack of legal redress means that the repayment of the liability cannot be enforced (for example, because the borrower is not working, there is no real estate or valuable movables), all paths have been exhausted and further attempts to pursue claims would involve unnecessary costs.

Borrowers must submit an application to the Minister of Science and Higher Education both in the case of a desire to completely or partially cancel the debt. You should attach to it all documents that confirm the legitimacy of the application (certificate from the rector of the university for the completion of studies among the best students, medical documentation, death certificate).

 

How to build a positive credit history?

Creditworthiness is an expression that is most often used in the context of assessing the chances of getting a loan. Particular attention is paid to one of its elements – the amount of earnings. While it is undoubtedly very important, this does not mean that you can also ignore other important factors that may be decisive for us.

We are talking primarily about credit history, which we tend to often forget, which can ultimately have unpleasant consequences. So how do you build a positive credit history? What are the rules for building a good credit history, and what affects it negatively? Can having an empty credit history harm us?

What is credit history?

What is credit history?

Before we get into how to build a positive credit history, it is worth considering for a moment what it actually is. The credit history is a record of the debts that a person currently repays and has repaid in the past. It contains information about whether payments are made in a timely manner and if not, what is the delay.

From credit history, you can not only conclude whether someone is reliable and credible, but also whether, for example, they tend to incur many different liabilities at the same time. In Poland, the collection and storage of credit history are handled by a non-governmental organization called the Credit Information Bureau (Credit Checker). There are also several registers of debtors, however, unlike Credit Checker, they contain only negative information, and therefore do not disclose the entire credit history.

Each bank, when considering a loan application, requests Credit Checker for information about a potential borrower. Thanks to this, he can easily, quickly and transparently assess the probability with which he would pay off the debt on time.

Rules for building a credit history

Rules for building a credit history

Improving and building a good credit history is not something that can be done overnight. It’s hard to take any shortcuts in this regard. You just have to be consistent and patient, and also follow the rules below.

Build a credit history from a young age

Many people mistakenly assume that an empty credit history is not much worse than a positive history and will not prevent you from getting your dream loan. However, the reality is exactly the opposite – an empty credit history is not much better in the eyes of banks than a negative one. Even young people who have not taken any loans in the past because they did not feel such a need, and then applied for a mortgage can find out about it painfully.

A person who has no credit history is simply unpredictable for the bank. She may be a perfect customer, but she can also be extremely irresponsible and unreliable. In this case, the bank must assume the worst, because it can not afford to accept such a significant risk.

Therefore, one of the most important principles of credit history is to build it consistently and preferably from an early age. Thanks to this, if in the future we happen to be late with the repayment of some debt, it will not be very blatant against the background of a positive credit history carefully cultivated over the years.

Take care of timeliness and do not exceed the limits

bank

On the one hand, this seems obvious, but on the other, it is worth mentioning. For our credit scoring (i.e. a score based on our credit history), the most important factor is the timely payment of liabilities.

Any delays in repayment of loans will destroy the effort put into building a good credit history. Of course, this does not mean that we have no right to make any mistake – the banks are aware that no one is perfect, and everyone can have a bad time. Therefore, several negative entries among the dozens of positive will not be a great catastrophe.

Not only delayed repayment of loans, but also exceeding the credit limits granted to us is to our disadvantage (although to a much lesser extent). Therefore, use them carefully and occasionally, not often. Continuous use of them will prove a very unstable financial situation.

We are also badly informed about the frequent submission of credit inquiries to many different banks, which is why they should be kept to a minimum. If we are wondering whether a loan would be granted to us in a given bank, instead of submitting the application, we can, for example, use the creditworthiness calculator, which we will probably find on the website of the selected institution.

Home loan with credit repurchase, is it possible?

You have consumer credit and you are now wondering about the feasibility of taking out a new loan, to buy a house this time. If the credits are not the same, it is sometimes possible to have a solution.

Combine consumer loan and home loan:

Combine consumer loan and home loan:

Many people took out a mortgage when they decided to buy their house or apartment. Home loans are not subject to the same laws as consumer loans. This is why it is not possible, for example, to buy a house, even at a low price, through personal credit.

It is also not uncommon, after this first loan, that they take out one or more consumer loans. This can be a work loan, to improve their habitat, or to furnish their new interior to their liking. It is therefore quite possible to combine the two.

In case of financial difficulty, consider buying back credit:

In case of financial difficulty, consider buying back credit:

One loan, then two, it is easy to get money quickly, when you have projects full head! You still have to be able to repay your various loans. Even with solid incomes and good management, it can happen that a household finds itself in a delicate situation. An accident in life can be the cause. If this problem generates additional costs, the repayment capacity may be unbalanced for a given period. It is however imperative that the drafts are reimbursed.

Why, in this case, not opt ​​for the repurchase of credit? It is possible to combine certain loans, including the mortgage and consumer loans. To do this, you can use a simulator to see if this option is possible. If you prefer to go human, to explain your situation and your temporary woes, contact a credit broker.

Contact a broker to help you with your credit repurchase:

Contact a broker to help you with your credit repurchase:

A broker can, if he has all the data relating to your financial situation, tell you if the repurchase of credit, including the mortgage is feasible. To do this, it will rely on certain data. You have resources and expenses every month. It must therefore be based on these elements, to calculate the remainder to live, according to your family composition.

Once done, this will allow him to have a clearer idea about your repayment capacity; that is to say the amount that you can borrow (and therefore repay) without it exceeding the debt ratio, which the credit companies estimate at 33% maximum of monthly income. If he thinks that the file can be accepted, his work does not stop there. He can suggest that you compare the offers of the various banking establishments, to find the one that will be the most suitable at first and then the most advantageous. That is to say the offer that will allow you to pay as little as possible over a longer period.

When considering what type of loan to choose

Mortgages and cash loans are among those that are very popular. Often, however, we do not know which type of product to choose to make it profitable for us. Let’s check what the situation looks like.

We should first estimate how much money we need. Mortgages are intended for people who want to borrow more money. Most banks offer loans of this type from USD 50,000. So if your needs are much smaller – then opt for a cash loan. If you need a loan of several dozen or several hundred thousand dollars, then you should think about a mortgage loan.

Which loan is cheaper?

Which loan is cheaper?

It can not be hidden that the cost of borrowing money to many borrowers is of great importance. When deciding on the choice of financial product to use, it is worth looking at what is more profitable for us.

When we compare mortgage loans and cash loans, we can easily see that in most banks, the first type of loan is cheaper. Lower interest rates make repayment of this type of liability less burdensome.

Unfortunately, it is worth knowing that mortgage loans are not a solution for everyone. They are only available to people who own plots, houses or flats. In addition, when deciding on a mortgage, we must incur additional costs related to the valuation of the property or entry in the land and mortgage register. A mortgage loan is therefore not a solution for people in difficulty and those who currently do not have any free funds or savings.

When you care about time

bank

Another aspect to consider when deciding on the type of loan is the time we need to get the money. There are situations in which we care about time. In this case, a cash loan will be a better option. At present, in most banks, the procedure for granting this type of loan is very quick and simple.

All you need to do is present a statement of your earnings. Then the bank checks our credit history and issues decisions. All this usually takes no more than an hour, and the money goes to our account on the same day. In the case of mortgage loans, the case is different. We must take care of property valuation, insure it and make an appropriate entry in the land and mortgage register. The waiting time for money is therefore much longer.

In summary, both mortgage and cash loans have their strengths and weaknesses. A thorough analysis of your needs and your financial situation is crucial. Thanks to this, we will be able to choose a financial product that will be fully adapted to our needs.