Personal loan and credit advice Insurance and financial education

In this article we talk about personal loan and credit counseling.

Matteo Evangelisti - Credit Advisor

What does it mean to do credit counseling and why is it important to give good advice to a client who needs a personal loan?

When a client comes to study because he needs a loan, first we want to understand what needs he has, that is, what he needs the loan, what amount he needs and what installment he is willing to pay. Not only that, we also want to understand what characteristics it has from a credit point of view, ie what work does it do, what kind of contract it has, how many years it works, if it has other financing in progress, if in the past it has had problems paying any installments, what kind of family situation does it have.

The information on income and on its credit history helps us to understand if the client is fundable, while those on the finality of the financing allow us to define the most appropriate form of financing for his needs and his so-called risk profile, that is to say his real ability to repay financing.

How does the purpose of the funding affect the type of personal loan?

In the common language we use the term personal loan to indicate any type of loan requested by a natural person. In reality, in the language of credit, when we talk about personal loans we mean a loan for which we declare the purpose without having to document it, while when the loan is required for a specific reason, such as the purchase of a car or other assets, including the purchase of property related to the improvement of housing, we are talking about a loan. The substantial difference between personal loan and finalized loan is in the manner of liquidation of the loan: the personal loan is liquidated on the current account of the person who is the actual holder of the relationship, while the finalized loan is liquidated on the current account of the asset or service purchased.

What happens if a financing practice is learned without having first acquired and carefully assessed all the elements that contribute to the financing of the client and the choice of the most appropriate type of loan?

In fact, with the automation of the procedure for establishing the viability of a client made available to intermediaries by financial institutions, it is sufficient to enter the customer’s data in the system to find out if he has the requisites to access a loan and under what conditions. However, to do so without first evaluating all the elements we have at our disposal, both from the point of view of income and from the point of view of creditworthiness, risks to turn against the customer. This is because, when we insert data into the system, we actually instruct a financing practice that remains tracked in CRIF , even when the request is rejected and that information could preclude the customer from accessing other financing with other financial institutions, as any waste of which remains a track will disqualify the credit profile.

I would add that for the Bank of Italy one of the intermediary’s obligations is precisely to avoid a person’s over-indebtedness, in addition to providing him with a series of documents aimed at making her aware of the regulations in force on transparency and privacy.

What is CRIF and why is it so important in evaluating a loan?

CRIF is the database that banks and financial companies have access to for information on the financial viability of a client and to whom banks and financial institutions communicate information regarding the credit situation of each client, including unsuccessful loan applications. end and loans for which the due dates of the individual installments have not been met, in addition to loans in progress, from the loan to the personal loan, from assignment to the current account, to unauthorized account overdrafts.

So, to understand if a customer is fundable, in addition to knowing how much he earns and what amount he needs, do you also need to know his credit history?

Exact Luisa, knowing how much he earns and for what amount he wants to be financed is not enough to understand if a client is eligible for funding. As I have already told you, one must also know what kind of work it does, what kind of contract it has and how long it has been working. Indeed, for some types of personal loans, such as the assignment of the fifth salary, we also need to know what type of company works because in this case the customer’s funding also depends on the reliability of the company he works for.

Besides this you need to know if you have other loans, what kind of loans it is, what residual duration they have and how much the installments amount. In order for a customer to be financed, it is necessary that the sum of the installments he has to pay be correctly compared to his income, in compliance with the Bank of Italy guidelines on over-indebtedness. When we are in the presence of an installment that is likely to expose the customer too much to his income, we must resort to a guarantor, ie a person who pledges to repay the loan together with the customer and has an income capacity that, added to that of the client, make financing for both of them sustainable. Of course, not everyone can act as guarantor, in addition to guaranteeing a loan, from a credit point of view, it is equivalent to having borrowed and this could change its financing, if the guarantor himself wants to access a loan in turn, for where the appeal to the guarantor is something to be assessed carefully on a case-by-case basis.

In the absence of a guarantor, what can you do if the client has other loans and the sum of the installments is too high?

A debt consolidation loan can be used, which is a type of loan which, in addition to the sum requested, also allows the financing of the residual amount of other loans. In this way, especially when we are in the presence of loans that have a short residual duration and can be extinguished in advance of the maturity, we can significantly reduce the monthly payment and thus obtain a sustainable payment / income ratio even in the absence of a guarantor. Obviously to do this it is necessary to extend the duration of the loan.

Let’s go back to the information that allows us to define the client’s funding. At one time, the so-called precarious workers had difficulty obtaining a loan, even when in fact they had business continuity, because the financial sector did not look favorably on fixed-term contracts and all other forms of employment relationships other than permanent employment contracts. . Is this still the case today or do the criteria for financing take into account the fact that companies are increasingly using forms of contracts other than permanent contracts?

Something has changed and many financial companies today take into account the evolution of the world of work in assessing the client’s funding, but there are no general rules and each situation must be analyzed individually.

Speaking of assignment of the fifth you told me that the financing of a client also depends on the type of company he works for. Can you explain more clearly to the readers of Parliamo di Assicurazione because the possibility of financing the client depends on the type of company he works for as well as on the type of contract he has?

The assignment of the fifth salary is a form of personal loan a bit ‘special because the installment is paid to the financial directly by the employer, who in turn decurposes the salary of the employee. Since we have an upstream withdrawal, in theory the financial company always has the certainty of repayment. In practice, however, this certainty only exists when we are dealing with an employer able to guarantee the job for the employee for the entire duration of the loan or in the presence of an accumulated TFR sufficient to guarantee early repayment. debt if the company is no longer able to repay the loan on a regular basis.

For this reason, when we talk about the sale of the fifth salary, other factors come into play, such as the distinction between public companies and private companies and, in the private sector, the size of the company itself is decisive, as well as the seniority of work. of the employee.

On the other hand, the assignment of the fifth salary has the advantage, precisely because it is a loan that is repaid directly by the company, which can be granted even in the presence of other loans, regardless of their amount, provided that the monthly payment does not exceed, in fact, one fifth of the salary.

Again, advice is important, indeed, perhaps even more so than for other types of loans. In fact, the possibility of obtaining the fifth salary even in the presence of other loans exposes the customer to the risk of over-indebtedness and therefore to all the negative consequences that may arise from the non-payment of existing loans.

Thanks , also on behalf of the readers for this chat and for the clarity with which you have helped us to understand the importance of a good advice before arriving to instruct a practice of financing. If you agree, next time I would like to go into the merits of the elements that contribute to define a financing of what parameters we must take into account to assess the adequacy and convenience of a loan. Then I would like to discuss with you the assignment of the fifth salary and I would also like to open a section dedicated to readers’ questions.

Thanks to you and to the readers of the blog for giving me the opportunity to talk about the importance of credit advice and the elements that contribute to defining a client’s funding. It will be a real pleasure for me to be able to continue to provide information on funding to readers of Parliamo Insurance and Finance and as of now I am available to answer the questions of your readers.