Purpose of the cash loan Purpose of the loan Credit cost APRC
Pursuant to the statutory definition of the loan agreement, the bank provides the borrower with a specific amount of cash to be used for the purpose resulting from the agreement. This means that the purpose of the loan is determined by the loan agreement. By signing this agreement, the borrower agrees to spend the funds transferred to him for a specific purpose. Moreover, he cannot change the purpose of the loan himself.
Purpose of the cash loan
The situation is different in the case of cash loans. Here, the bank gives us cash, which we can spend for any purpose. The bank does not interfere in what the funds from the loan will be used for. It also does not control the borrower in terms of the purpose of the loan, because the cash loan can be used for any purpose. The borrower may at any time change the decision on what the money is allocated and can do it as many times as he wants.
A cash loan is usually a short-term loan. Banks usually grant it for a period of 1 to 2 years. We can also face the situation that the cash loan will be granted even for a period of 8 years. Cash income is usually secured by our income and loan insurance. As a rule, we can opt out of the latter, but banks sometimes make the decision to grant a loan dependent on whether we agree to take out insurance. In the case of cash loans for larger amounts, the bank may expect to be appointed as a guarantor who will repay the liability for us in the event of our financial problems. Cash loan is one of the more expensive loans on the market. One of the reasons is the type of collateral, which is usually only our income. In this situation, you can be tempted to say that the bank risks lending us money. Therefore, for increased risk, we must pay the bank appropriately in the form of a commission on the loan granted.
Cash loan costs
Cash loan costs do not differ from those for other loans. Therefore, we will have loan capital, interest on the loan capital, commission for the bank and other additional costs, such as credit insurance, to be refunded. In order to fully assess and compare a given cash loan with another one, the APRC should be taken into account, i.e. the actual annual interest rate. This is the easiest way for people who are not skilled in banking and credit. As a rule, the lower the APRC index is, the cheaper the loan will be. Of course, there are many other factors that should be taken into account, e.g. what help the bank offers in case of temporary financial problems. However, in the case of low-value cash loans this may be sufficient.