Sometimes, many people may experience a financial situation in which they find it impossible to have enough money to carry out any activity, either to become independent, study or undertake.
This should not be an excuse to dispense with all our dreams, and that is why there are many financing methods where we can have the option of obtaining the money we need, with the possibility of returning it when we have the conditions to do so.
These types of loans are very fashionable lately, especially because of the current crisis, although we must be very careful with the amount of money that we are going to request , since the loans lacking, although they are some of the most beneficial, also He has some cards under his sleeve that are important to know.
What does grace period mean?
A loan in default consists of a period of time that is established in the liability document, where the debtor agrees to pay once it is completed. During that period of time the debtor must be able to produce the money necessary to pay it plus interest. It is very requested by individuals who have an urgent economic situation and know that they will not be able to repay the loan in the short term .
This method of financing is very requested by those people who need to pay a mortgage or companies that wish to undertake in a new market niche and who know they can return it in the future. There are also a series of provisions that are documented in the contract to understand the conditions under which the loan will be returned.
Who can access a lack loan?
In this sense, let us give an example, that if we want to undertake we can apply for a loan for a total of € 20,000 or more, the document specifies that in a total of 3 years the venture will start to produce profits and that is when we should to pay the loan with those gains , although it is important to point out that to those € 20,000 are added very high interest rates.
Any individual can access a loan of this type, even if it is to study at the university. The period of lack can last between 4 to 5 years and can be returned when the student graduates, since he can enter the world of work more easily.
However, one of the most important personal conditions to request it is that it is difficult for us to have a regular income to cover our expenses, although most of the time it depends on the type of deficiency we request, so we need to finance ourselves. With this method. Even so, if we request any other type of loan, we can access a period of lack by negotiating with the second part .
What are the types of lack of loans?
A deficiency loan meets certain characteristics that can be very beneficial during the period of time in which it must be paid. For example, we can amortize the capital by reducing a little the fees that we must pay or even eliminate them completely during the established time. This duration can be established in the short or long term and we can request them at any time. Most of the time it is requested in advance when we notice that we will not be able to pay or when we have certain problems of default with mortgage loans .
In this way, we have two kinds of deficiency loans that we can go to:
- Total lack : As the name implies, we can establish a period totally free of payments in the contract or in the loan responsibility document. This is usually very useful depending on our economic situation, since it allows us to exempt ourselves from mandatory payments for a long time to focus entirely on the production or activity for which we have requested the loan.
- Partial lack : This is the most requested, since with it we can pay only the interest of the loan on a monthly basis and then proceed to the rest of the payment once the period of lack is over.
It is important that we keep in mind that the periods of lack can differ greatly according to the quantity and the period. In any case, we can request a period of lack even if we have any other type of active loan , we must only observe if we have that possibility according to the conditions of our contract and the availability of the financial entity.
Is it ideal to request a grace period?
A loan of lack is usually very useful in case we are involved in a financial emergency, so we will need a large amount of money with great benefits in the period of payment . They are perfect to pay off debts that we have accumulated and to alleviate a little the economic burden that we are suffering. However, we must be sure that we will recover economically within the agreed period.
Although it sounds quite beneficial, it is not highly recommended, because although we do not pay the loan in established monthly payments, if we will be accumulating a large amount of interest , something that may represent a debt in the future. For this reason it is important to know that we will have the necessary resources to pay all the credit plus interest within the established term. If we cannot pay at the agreed time, we will also have to face additional expenses.
The ideal time to apply for a loan for lack is when we are completely sure that we will succeed according to the conditions proposed for payment. In addition, we can plan the return of it correctly .
It is also important that we verify if there are no other financing methods more appropriate according to our situation. In case we only need a fast and accessible loan we can choose a mini-loan to access a large amount of money without the need for a guarantee and other requirements.
What is the cost of deficiency loans?
As we mentioned earlier, the period of lack can be very useful in case we want to cover some non-payment needs, although this also means a great price. During this time in which we save the monthly payments or even if we opt for a partial loan, in which we are only paying for the interest, the capital that we have pending will be maintained and the interest accrues in that amount, so in the end We will be paying more than we expected .
To understand it better we can use an example of financing. Suppose we request a loan with a € 10,000 deficiency loan and we must repay it in a total of 5 years. Therefore, we established a total of 60 installments of approximately € 203 with the entity, with an APR of 8%. So in total they would be just over € 12,000. Now suppose we can make the loan repayment in 1 year, the total would be more than € 12,500.
In case we want to extend the period of lack we can negotiate with the bank , although sometimes it is also less viable since there will be more interest charged to us. So we must calculate what would be the most appropriate option so that we do not lose more money.
In any case, requesting one of these loans is more affordable than stop paying the loan since the interest for late payment and the commissions for the notices of default are higher, so it is better that we consult what the ideal option can be compared to to this.
Additional requirements to request a deficiency
It is important that we are sure that it is profitable to request a deficiency , since we will also have to make some additional expenses to complete a series of requirements and demands. For example, we will have to make a novation, which is a procedure by which we must pay a commission established by the entity. It is necessary as it will be used to change some aspects of the loan contract.
Also, depending on the specifications of this document, the bank could increase interest rates, although this depends on the conditions of the entity, so we must check the fine print at the time of signing this type of contract, including interest rates that are subject to regulations that we cannot ignore. Some conditions that may apply are:
- When requesting a novation for a deficiency to extend our mortgage payment period, we must have paid a total of installment fees so that the bank is sure that it will not lose.
- The maturity of the mortgage must be far enough when requesting it, some bank entities even indicate a total of 5 years for its expiration.
- The interest of the grace period will also be increased by 1% of the interest on the mortgage.
Finally, we must be aware of the requirements of the law in case we request a loan for a mortgage . We can rely on the Code of Good Banking Practices, a regulation that was approved in 2012 to improve the conditions of the mortgaged. Likewise, in 2015 a series of changes were approved in the Law of the Second Opportunity where both parties must comply with the necessary requirements to access the deficiency.