Do you know your rights when applying for personal loans?

More than 70% of people who ask for personal loans in Spain do not feel confident enough that they have chosen the right product, according to EU data. Getting financing remains a headache for many who do not feel protected by the law and who believe that the loans are opaque and deceptive. For all this since 2008 people who apply for personal loans are covered by the Consumer Credit Directive, a law that affects most personal credit contracts between € 200 and € 75,000 and from which mortgages are excluded.

Essential rights when we hire a personal loan

These are our rights before, during and after hiring personal loans for bad credit- see this.

1. Right to an informative publicity

All ads about personal loans must have certain information explained in a clear and concise manner that allows us to compare different offers:

  • Fixed or variable interest rate
  • Annual Equivalent Rate (APR)
  • Contract period
  • Explanatory example

2. Right to be informed before signing

Before signing a contract for a personal loan the lender must provide us with all the essential data to know the total cost of the loan in a document called “European Standard Information Document on Consumer Credit” (SECCI). This information must contain what type of loan we are hiring, the amount that will be granted, the APR, the duration of the contract, the monthly payment, the commissions, the linked products and any other data that is important to know the price and the implication of the personal loan.

3. Right to clear and understandable information

All the data that appear in the SECCI must also appear in the contract, however in the contract, the precise data must appear for our loan, such as the monthly installments, the term, the amount that we have requested and all the previous data to plicados our credit application in a clear and understandable way.

4. Right to cancel the contract

Once we have signed the loan contract we can decide that it is not a good idea or that we no longer need it. The law gives us the right to back down: we have up to 14 days from the day of signing to withdraw from the contract. We will have to return the money of the credit plus the corresponding interests to the days that we have used it and the commissions.

5. Right to early repayment

Throughout the life of the personal loan, we can find that we have enough money to return the remaining monthly payments to the lender at one time. The European directive establishes that all customers have the right to repay the loan in advance, although it is possible that they charge us a commission to compensate the income that the entity stops earning. The commission ranges between 0.5% and 1% on the amount we reimburse.