The most common conditions when applying for a loan

Do you need a loan to finance a project but don't know how to get one? We'll explain everything you need to know.
Applying for a loan with a financial institution is a process that takes time and requires the applicant to think carefully about whether they are sure that they need it. A loan is a type of contract, and this means that it must not be taken lightly. The borrower must be aware of the fact that the money loaned will have to be paid back over a certain period of time, along with interest, fees, and costs. Of course, a loan is not just about the borrower, since the bank granting it must look out for its own interests and determine whether the borrower will have the ability to pay back the money loaned. To achieve this, there is a series of conditions to apply for a loan that you must meet for it to be granted.
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Terms and Conditions that the applicant must meet to apply for a loan

When a loan is granted, whatever its type, each financial institution can establish different terms and conditions. These will depend upon the bank's own risk policy, as well as upon the amount being borrowed and its purpose. Despite this potential disparity, there are some common requirements that all banks demand of people who apply to them for a loan. Among others, these include the following:

  • Being of legal age: banks need to be sure that the money they loan will be paid back, and this is only possible if the applicant has a stable credit history and a regular source of income. Both of these conditions are difficult for a minor to comply with.
  • Solvency and stable income: or in other words, evidence of having the ability to pay back the money loaned. To meet this requirement, the person requesting the loan must demonstrate that he or she has a stable income, which must also exceed the obligations taken on with the bank. For example, if the loan will require €300 of the total amount borrowed to be paid back each month, there must be income sources that will allow this amount to be freely available on a monthly basis.

Seeing these general requirements for requesting a loan, it is easy to guess that people with regular income or a permanent contract who have a long length of service in the same company, or civil servants or public employees, will find it easier to secure a loan.

What is a personal guarantee?

When applying for a loan you must be aware of a general principle found in Spanish law, as expressed in article 1,911 of the Civil Code, which states the following: “To comply with the obligations the borrower must make use of all of his or her assets, both present and future.” This means that the borrower has the obligation to pay back the amount agreed upon with the bank by using all of his or her current or future income and property. When a loan operation involves more than one person, in the form of co-holders of the loan, this can produce two types of personal guarantees or liabilities:

  • Joint and several liability: the bank can indiscriminately hold one of the borrowers liable for 100% of the amount of the loan, and the borrowers can then make claims against each other in relation to the amounts owed as agreed upon between them.
  • Proportionate liability: Each borrower is liable to the bank for a specific amount of the loan as previously agreed upon, with these amounts adding up to 100% of the loan.
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Required documentation and other requirements when applying for a loan

Depending on the bank where the loan is being requested, there may be a greater or lesser number of documents required. It is most typical for a loan applicant to be required by the bank to provide his or her Tax ID Number (NIF) or Foreigner ID Number (NIE), the checking account number where the money loaned will be deposited, a photocopy of multiple salary receipts or evidence of other regular income being received, an employment history so the bank can have an idea about the borrower's relationships with employers, the most recent income tax return, photocopies of deeds and titles for real estate and other assets possessed, and information related to any other loans that may exist.

In addition to all of this documentation, if the loan applicant is self-employed the bank may also request a photocopy of the self-employment registration document, the most recent annual VAT statement, and the most recent quarterly Income Tax payment slips.

However, BBVA offers a Loan Fast for new customers that requires documentation minimum. Only you ask for your ID number (be able to carry out one fotográfia with your cell phone within the process of application) and connect with their other bank. Through the process of BankingAggregation, the applicant owe connect, with your user and password, with their other bank where has direct billing your salary. This way, consider your movements banking with the aim of study your situation financial.

Finally, when requesting a loan, if you have your salary directly deposited at the bank during the entire life of the loan you can benefit from an interest subsidy, which means that the interest rate will be lower. For those who are looking for a loan, BBVA makes a loan simulator available that potential borrowers can use to view the prices and payment amounts for their future loan. You can find all of these details and many more at the BBVA website.

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