Monthly Archives: March 2020

Loan and income tax – what to keep in mind

As it is well known, taking a loan involves additional costs. In addition to the amount borrowed, we always have to pay interest. Some, however, are wondering if these are the only fees or should they also expect taxes. In some cases, this is indeed the case, but there are also situations that exempt from tax.

When we borrow from a private individual

borrow money

To learn more about this matter, at the beginning you should ask yourself an important question – from whom we want to borrow money. If we sign a so-called loan agreement with a private individual, he or she may be subject to the tax on civil law transactions. In practice, this means that the person who collects money is obliged to pay the state 2% of the amount borrowed.

It should be noted, however, that only amounts over USD 5,000 collected from one person over three years are taxed. When this ceiling is exceeded, the borrower has 14 days to pay the applicable fee. Of course, it often happens that when borrowing money from a private individual we do not draw up any contracts, and this is a big mistake.

We should do it if we borrow sums greater than USD 500. Why is this so important? If the Tax Office finds out about a loan, it may impose a tax of up to 20% on it. Borrowing from a private person (who is not our relative) is usually associated with considerable risk and it is best to document the entire transaction and carefully check the terms of the contract, especially repayment information.

What about income tax?

We don’t really get any income by borrowing money, so we don’t have to pay tax. The lender is subject to taxation. When counting out a loan at an interest rate, he counts on profit, so he should pay tax on it. The last point is extremely important. He does not bear fees on the whole amount borrowed, but only on interest, which becomes income. In this case, a 19% fee is required, commonly known as tax – referring to individuals or traditional income tax – for businesses.

Advantages of non-bank loans

money and dollar

It turns out that when collecting money from non-bank companies, we do not have to remember any taxes. Therefore, we will be exempt from the aforementioned tax on civil law transactions, although of course we will still be obliged to pay the full amount of the loan plus accrued interest. As you can see, non-bank loans are much more profitable than, for example, a loan from a private individual.

In addition, we will be dealing with clarity of rules and certainty that we will have to give back exactly the amount (no more and no less) about which we were informed when concluding the contract.

There are ways to borrow money without paying taxes. However, these are a few situations and their choice should depend on our individual needs. One thing is certain – each transaction should be documented so that in the event of unforeseen situations we can check the provisions of the contract and refer to them.

Unpaid loan – what are the consequences?

 

Borrowing requires the return of not only borrowed capital, but also interest and all additional costs. What if, for various reasons, we are unable to pay our liabilities on an ongoing basis? An unpaid loan usually has financial consequences.

Every lending institution, including not only Fine bank, but also banks and credit unions earn money by borrowing money, so they carefully supervise repayment timeliness. Modern IT systems help them in this, which not only automatically records repayments on clients’ accounts, but also informs about possible delays. Their occurrence usually begins a separate procedure, which aims to clarify the situation and lead to the settlement of outstanding obligations by the customer as soon as possible, while charging additional costs.

Unpaid loan – consequences

Unpaid loan - consequences

Let’s get to the specifics and examine the consequences of an unpaid loan. If you did not pay the installment because you just forgot how to settle the liability as soon as possible and most likely it will end up with small costs associated with penalty interest or the costs of the debt collection process.

The situation is slightly different in the case of arrears caused by financial problems. It is not worth underestimating such a problem and wait for the moment when our financial situation will improve. It will be wiser to contact the lender and find a solution together. Postponement of installments (so-called credit holidays), spreading repayments into more convenient installments or simply freezing costs related to debt collection are just a few of the scenarios that may work in such a situation.

The costs associated with minor arrears are usually not excessively high, although this is not the rule. The consequences of prolonged non-repayment will be much more severe for us. If the debt is at least PLN 200 and the arrears last at least 60 days, we are at risk of being entered in the register of debtors. Such an entry may in the future make it very difficult for us to apply for more loans. And even if we can find an entity for which this will not be a problem, the cost of the loan will be higher.

Termination of the loan agreement

Termination of the loan agreement

An unpaid loan may also, according to the concluded contract, result in its termination by the lender. After the notice period has expired, we will be required to pay the liability once. This means that we will have to pay back the entire loan with all additional costs accrued for the day, not just the current arrears. At the initial stage of the debt collection process, the lender will conduct it without the court’s involvement and then proceed to court recovery. What is the difference? Debt collection carried out without the participation of a court involves sending reminders and requests for payment, for which, of course, additional fees are charged. If, despite taking such action, the commitment still remains unregulated, the case goes to court and usually ends with a bailiff’s execution.

Unpaid non-bank loan and checker

Unpaid non-bank loan and checker

If you think that information about the timely settlement of liabilities is transferred to the Credit Information Bureau only by banks and credit unions, you are very wrong. Currently, most loan companies also provide such data because they want to act not only in their own interest, but above all without harming their clients. This means that they are guided by the principle of responsible lending, and the reporting of unpaid loans is to protect consumers from incurring / adding another financial obligation that may be attached to the debt.

In addition, each debt collection process requires the lender to be extra involved, to take certain steps and to draw conclusions to avoid such a situation in the future. The growing number of customers who are unable to pay their liabilities on an ongoing basis can lead to serious financial problems for the lender.

Therefore, remember to always contact the lender in case of arrears or risk of their occurrence and try to find the best solution. You will save a lot of time, nerves and money. An entry in checker may effectively hinder you from incurring further liabilities for a period of up to five years. If the delay is a day or two, you should not worry too much, but in any other situation the consequences can be much more severe.

Installment loan calculate interest.

When calculating the interest for an installment loan, the banks differentiate between a credit-dependent loan and a credit-independent loan. In the case of credit-dependent loans, individual interest rate advantages are offered from customer to customer with a corresponding optimal credit rating level, while in the case of credit-dependent loans all customers receive the same interest offer.

Calculate and compare the installment loan interest

Calculate and compare the installment loan interest

The effective annual interest rate can differ widely among banks. A high interest rate leads to higher interest costs, especially if your loan has a long term. Choose a bank that has an appropriate interest rate to get a cheap installment loan. The potential interest charge should be carefully calculated before entering into a loan agreement. Only if you calculate the interest in advance will you find a financially acceptable end result. When calculating the interest, our comparison portal helps to quickly find a low interest.

Residual debt insurance makes the total cost of the loan more expensive and should only be considered if you do not have life insurance or life insurance. In addition to the interest, costly additional security packages and closing fees can put an undue burden on the private financial budget. Therefore, you should check the conditions carefully before signing the contract.

Interest calculation: Determine cheap installment loan with the comparison

Calculate low interest rates with the installment loan calculator.

Calculate interest on the installment loan

Calculate interest on the installment loan

The choice of bank decides, among other things, the amount of interest. The interest rate is different for each provider. Additional costs for insurance are not included in the annual percentage rate, but do increase the total loan amount. Test several loan models with the loan calculator and compare the interest on the installment loan. The interest burden increases with a long term, if you have the option to choose a shorter term, you save interest.

With credit-related loans, you often get special conditions that you should use if you meet the requirements. As a customer with a good credit rating, you are particularly interesting for the banks because the credit default risk for the banks is reduced. With a favorable interest rate offer, some banks grant a credit rating bonus, which reduces your overall loan costs.

Compare before taking out a loan

Compare before taking out a loan

An installment loan with low interest rates is the basis for your low-interest loan. Our installment loan calculator calculates the interest of different loan offers. Find a cheap provider. A new home furnishing or the renovation of the house can then be put into practice as quickly as other consumer wishes that require a loan on installments.