Loans

People generally take a loan to cover more expensive purchases. Keep in mind that entering into a loan contract obliges you to pay back to the creditor the loan amount plus the interest.

Prior to entering into a loan contract

  • Ask for offers from numerous lenders and compare them to find the best one for you as the terms and conditions of lenders can vary substantially,
  • Keep in mind that you have the right to receive a information sheet together with the offer in order to compare terms and conditions,
  • thoroughly inspect the terms and conditions of the loan contract,
  • Ask the lender for additional information in order to assess whether the offered loan contract meets your needs and financial situation,
  • Find out how much the loan will cost you in the end by taking into account interest (the cost for using credit) as well as other costs related to the loan,
  • Find out whether interest is based on the loan sum or the loan balance,
  • Decide if you want a fixed or a unfixed interest rate loan and ask the lender to explain the difference between these two,
  • Thoroughly think about what monthly repayment sum and repayment period best fit your lifestyle and income (the monthly repayment sum is smaller for a longer repayment period, yet the sum repaid in interest will be considerably larger than for a shorten repayment period),
  • Find out what will happen if you have difficulties in repaying the loan and how you can apply for a grace period.

If interest is based on the loan sum, you will have to repay the same interest sum each month until the last repayment. If interest is based on the loan balance, the interest will decrease as the loan balance decreases.

In case of a fixed interest, the lender will agree with you on an interest sum valid until the end of the loan period or a fixed period. In case of a variable interest, the interest is composed of a basic interest rate (e.g. Euribor) and a fixed interest margin. The fixed interest margin is generally unchanged during the repayment period, but for example the Euribor rate will usually change every 6 to 12 months. Therefore, the loan payment amount will change every 6 to 12 months.

You may partially or fully perform obligations rising from the loan contract before the prescribed time. The creditor has the right to demand a refund for the repayment of a loan ahead of schedule. The basis for the right of prescheduled return and refund allocation is stipulated in § 411 of Law of Obligations Act.

Remember!
  • The basic interest rate changes in time. Thus, it is not possible to tell in advance the most beneficial interest method for the whole loan period.
  • In case of home and other loans secured with real estate, remember to consider other costs besides the interest (such as notary fees).
  • In case of loans secured with real estate, find out more about the consequences of establishing a mortgage on your housing or other real estate.
  • You can withdraw from the consumer credit contract without a justification within 14 days. In case of a consumer credit contract linked with residential property, you may withdraw from the consumer credit contract within seven days.
  • In case you use the right to withdraw, you have the obligation to pay the creditor immediately but not later than 30 days since the withdrawal request the principal sum of the loan and the interest for the time the money had been in your possession.
  • If you wish to repay the loan before the prescribed time, make sure to check whether your loan contract specifies a term for advance notice.