A 12-month cash loan – is it worth it?

 

When choosing a loan period, you must be guided by this principle: we choose the highest installment that we can pay in a given month. For example, a 12-month cash loan will be an excellent solution.

A cash loan is a financial product granted by banks, which is often chosen by consumers. Its undoubted advantage is the relatively long repayment period. Banks provide a cash loan for 12 months or even 36 months. What exactly should you consider when choosing a cash loan? What conditions must be met to be able to apply for such a financial product? We answer all these questions in this guide.

Cash loan – what is the purpose of taking it?

Cash loan - what is the purpose of taking it?

All specialists divide loans into two types: consumer and investment loans. The former are contracted to buy or produce any goods that the borrower would like to use, but he does not have enough funds. Thanks to it, we can finance any expense of our choice – buying a car, renovating at home, going on vacation or anything we want. In turn, investment loans are dedicated to those consumers who would like to invest the funds obtained from the bank. For this reason, they are used by entrepreneurs who want to buy better equipment, a factory or any other valuable assets that will allow them to increase their profits.

Some may wonder what is the point of taking consumer credit since it will not translate into any future profits. Isn’t it better to save money and buy specific items and services with your own funds? The answer to this question is obviously not clear. The basic issue you should know about is the fact that when you buy something on credit, you buy time. If we were to save a few months, it was only after some time that we could buy what we dreamed of. Taking credit we immediately get what we want. Commission and interest is the price we have to pay for the time saved.

Everyone who wonders if it is worth taking a cash loan should ask themselves one question. Is it ready to pay for the loan in exchange for being able to use the product and service right away? When making decisions about taking a loan, our current financial capabilities are also an extremely important issue.

In what amount to take a cash loan?

In what amount to take a cash loan?

For what amount is it best to take a cash loan? Some will say: how much does the product or service cost you want to buy. However, this is not so simple. It should be remembered that the higher the loan amount, the higher the final cost of the loan. It is worth considering whether we have any savings. If it turns out that yes, then the planned expenditure pays off at least in part from savings. Then the final amount to be repaid under the loan will be much smaller.

Another thing to always remember is that the loan amount cannot be higher than our creditworthiness. All institutions carefully check the creditworthiness and credit history of their clients. We recommend that you always use common sense and be responsible when determining your loan amount. In addition, the monthly loan installment cannot be higher than the amount we would be able to save ourselves. In most cases, the bank will verify this for us when assessing creditworthiness.

Pursuant to the Act on consumer credit, cash credit only covers loans amounting to a maximum of USD 255 550. If we incur an obligation above this amount, then we will not be protected by the provisions of this Act. It may turn out, for example, that our loan has a very high interest rate or we may face extremely high penalties for any late repayment.

A 12-month cash loan – the best loan period?

A 12-month cash loan - the best loan period?

Once we decided exactly what amount we would like to borrow under the loan, we still need to think carefully about which loan period to choose. Of course, the installments depend on the selected period. The shorter the period, the higher the installment. For shorter loan periods, the total cost of a loan is lower.

When choosing a loan period, you must be guided by this principle: we choose the highest installment that we can pay in a given month. For example, a 12-month cash loan will be an excellent solution. One year is the optimal time to repay the commitment. Let’s assume we’re able to save USD 500 a month. In this case, the loan installment should amount to a maximum of USD 500.

We advise against choosing loans with a very long repayment period, for example for 36 or 48 months. Of course, the installment will be lower, but in this way the final cost of the loan will be much higher.

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