The personal loan is a form of financing which provides for the granting by the credit institution of a sum of money repayable in installments with an increase of a certain interest rate in a predetermined time. It falls into the category of non-finalized loans, i.e. all those operations which are not aimed at a purchase of a specific good or service. The contract is concluded between the applicant and the lender who, once the request has been accepted, delivers the sum directly to the applicant. No guarantee is required in the event of insolvency by the debtor and this makes this financial product particularly risky for the lender, which are usually banks or financial companies.
Personal Loan and Guarantees
We have said that the personal loan usually does not require collateral, such as mortgages or different rights on the applicant’s property. In some special cases, however, to limit the risks of insolvency, the lending institution requires special conditions during the contract. It may happen so that the contract provides for the cambializzazione of installments or a single bill, which provides all or part of the amount paid. The most commonly used form of guarantee, however, is the signature of a co-obligation or a third-party guarantor, which guarantees the success of the operation. Basically this third person agrees to pay in place of the applicant in case this does not. Other times, to limit the risk of insolvency, the lending institutions require the subscription of particular insurance products, usually policies that cover the risk of death or the risk of loss of employment.
The Personal Loan Agreement
The personal loan contract establishes the conditions, under which the lending institution grants a sum of money to the applicant who undertakes to repay it by paying installments over a certain period of time. Like all contracts it must be signed by both parties, and the legislation provides for the essential elements of the contract as it must be drawn up. Let’s see what the law provides and what are the elements that must not be missing:
1. The type of financing
2. The amount of the loan and the method of financing
3. The number, amounts and timing of each individual installment
4. The annual percentage rate of charge (APR), which includes interest and ancillary charges
5. Details of the analytical conditions under which the APR can be modified
6. The amount and the reason for the charges that are excluded from the calculation of the APR
7. Any guarantees required
8. Any insurance coverage required and not included in the APR calculation
In the case of consumer credit agreements which have as their object the purchase of a specific good or service, the contract must also contain the description of the good or service, the purchase price in cash, the price established by the contract and any down payment and finally the conditions for the transfer of the right of ownership in cases where the transfer is not immediate.
We remind you that these legal requirements must be respected, if only one of these conditions is not respected the contract will be considered void.
What happens when you don’t pay a loan installment?
The interruption of payment of even one installment leads to immediate default and the consequences are unpleasant. Interest is increased with the application of a late payment. The greatest risk is to be included in the list of late payers and / or reported to the risk center, which will normally share information with lenders and banks. All this leads to a deterioration of the reliability of the subject who will therefore have greater difficulty in obtaining credit. Failure to pay also authorizes the lender to unilaterally terminate the contract and the customer will be required to bear all costs, charges and any penalties.
Early repayment of personal loan
The law states that it is always possible for the customer to pay off the loan early. The law provides that it is possible to exercise this option by reimbursing the residual capital by applying a penalty that cannot exceed 1% of the amount financed.
Loan for age groups: Under 65 and Over 65
The very nature of a personal loan provides for the repayment of the sums obtained through the payment of monthly installments which continue over the years until the debt is extinguished. A personal loan can have a maximum duration of 25 years (such as an offer that no longer exists by MPS), but generally it does not continue beyond 10 years. This deadline is obviously respectable by an individual who is still of working age, i.e. less than 65, but when one approaches or exceeds this threshold, the personal loan payable to employees or self-employed workers must give way to the loan for retirees. The loan to pensioners falls within that particular category of financing that we can define as subsidized. The minimum and essential prerequisite, as can already be seen from the phrase, is that of being a pensioner. The pensioner status to access the pensioner loan does not necessarily have to be that of direct pension ownership but also that of indirect retirement, i.e. the survivor’s pension.