Banks and finance companies often impose certain conditions on applying for a payday loan to ensure the customer’s repayment ability and reduce their own risks. In this guide, we will cover the most common terms that can be found on loans.
Loan size in relation to income
When applying for a loan, do not look blindly at your own income. Traditional banks often do not set a specific threshold for granting a loan, but pay more attention to the size of the loan in relation to its income. For example, many banks consider it a rule of thumb that the monthly installment of a loan should not be 30-40% higher than the monthly gross income.
Good Finance, on the other hand, grants True Credit a maximum of three months’ gross income of the borrower. In practice, all loan providers (except some express brokerage firms) require regular income from the borrower. The value of any collateral may also influence the loan decision.
Therefore, it is more important to understand the relationship between income and expenditure as the loan should always be able to be repaid after all compulsory expenditure so that little money is left to save even in the event of unexpected situations. For this reason, it is worth bearing in mind that banks are also businesses – the amount of credit a bank can offer is just above the customer’s ability to pay. You must always know your solvency and financial situation when applying for a loan.
Regardless of income level, it is particularly important to compare loans before applying. Doing so can save you huge sums of money and getting a cheaper loan within your ability to pay.
However, some lenders have defined minimum income thresholds below which a loan cannot be obtained.
The income thresholds range from € 16,000 to € 18,000.
If your own income and solvency are not sufficient for the loan amount required, some loans may also be applied for with a co-applicant.
In addition to income limits, banks also set age limits for their loans. Already Finnish law says that people under the age of 18 should not be able to get debt, which sets a natural minimum age for loans. Often, however, 18 years is not enough, as the maximum loan age can be 25 years. Age limits are also intended to reduce the risk of loss for banks: banks feel that a 22-year-old is better placed to repay a loan than a newly-aged 18-year-old.
The upper age limits, on the other hand, range from 65 to 75, although not all banks set straight age limits. Elderly borrowers are perceived as a risk due to possible death or illness.
Some providers, such as Halino and Credent, offer a loan security service at an additional cost, which may help repay the loan if the borrower becomes ill, dies or becomes unemployed. Loan protection is also known as payment security or repayment security. However, you should carefully read the terms and conditions of the loan security, the terms vary greatly, even with the same loan provider: for example, Credit offers different collateral payment for 18-64 year olds than 65-75 year olds.
Living in Finland
When applying for a payday loan, you should assume that the loan provider requires the applicant to be permanently resident in Finland. It is also often a requirement that the applicant has been residing in Finland for the last 36 months. In addition to the place of residence, a Finnish bank account is the basic assumption when applying for a loan in Finland. On the other hand, there are exceptions to the housing situation, and sometimes Finnish citizenship is sufficient.
The applicant’s place of residence is again linked to the risks mentioned above. Many lenders assume that reliable verification of defaults requires a long period of time, such as 24 months. If the borrower has not lived in Finland for a while, his / her credit history during the stay abroad is empty, which makes it difficult to check the credit history.
If the applicant’s credit history was cleared before moving abroad, you can try contacting your bank to explain the situation. In some cases, the bank may make an exception to this condition. However, it is good to beware that some loan providers are in a strict position.