A lot of people don’t have the option of taking out a loan from a traditional bank. Whether it’s because of debt or a lack of official income. For this reason, we can often come across so-called non-bank loans. What exactly does this mean, what are their advantages and disadvantages, and where can their dangers lie? You will find out in this article.
A non-bank loan is a loan that is not provided by a traditional bank. Instead, it is offered by other entities such as various non-bank lenders, people-to-people platforms (such as Zonky) or private lenders. Non-bank companies do not have the same license from the CNB as traditional banks. Instead, they are only licensed to provide consumer credit. However, you may also come across providers without any licence.
Non-bank loans differ from traditional ones in many ways. The first most important difference is, of course, the type of provider. But in addition, non-bank loans also differ from bank loans in the conditions for earning the loan, the interest rate, the speed of processing and overall flexibility.
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Like everything else, non-bank loans have advantages and disadvantages compared to traditional bank loans:
Tip: Never sign anything you don’t understand. Rather, contact our experienced attorneys who will carefully review and explain the contract.
In a way, usury is also a type of non-bank loan. In practice, it is an extremely disadvantageous loan. Usury is illegal and any contract you sign is invalid, yet you can still come across it. Whoever lends money in this way takes advantage of a person’s plight and exploits them financially by setting extremely high interest rates. In addition to high interest rates, it is also common to have gallows terms and high penalties for non-payment.
Tip: Have you been tricked into signing an unfavourable contract corresponding to usury? We will advise you on how to proceed. We will protect your rights quickly, efficiently and profitably.
For some people there is no other option than to take out a non-bank loan, for others it serves as a temporary relief from a difficult financial situation. So in which cases do people take out non-bank loans most often?
A traditional bank will not lend money to people in debt. Therefore, these people often resort to non-bank loans. They can take out a non-bank loan even without a property guarantee. It is also a common practice for indebted people to take out a foreclosure loan, which is a really unfortunate solution that often leads to a debt trap. A much more sensible solution is so-called consolidation. There are both bank and non-bank consolidation with and without mortgage, which merges all loans into one.
Tip: We have discussed consolidation in more detail in our earlier article.
A distressed situation is also related to foreclosures, which may not only be caused by debts, but also by the loss of a job or the death of a partner. People in distressed situations often choose desperate solutions and therefore also form a large group that reaches for a non-bank loan. This is because with a non-banking company, they are assured that they will be approved for a loan and at the same time get the money quickly. However, this type of people can easily fall prey to loan sharks.
Another group of people who opt for non-bank loans are the self-employed (self-employed) and people with undeclared income. Self-employed people usually have a hard time getting a loan. Banks base their net income on a so-called flat rate. In reality, however, this is often much lower than the real income. Therefore, self-employed persons are often unable to meet the conditions set by the bank.
Similarly, people working “under the table” have no official income according to the bank, even though in reality they may earn hundreds of thousands. Therefore, a non-bank loan will come in handy for them too. Often, these people buy a house and take out a so-called non-bank mortgage, for which they guarantee the property in the same way as a conventional bank.
Tip: Are you planning to buy a house or apartment? We will provide you with a complete contractual and legal service related to the purchase of real estate. We will handle it within 48 hours, flawlessly and professionally.
A non-bank loan does not always have to be a risk. However, you need to read everything you sign and do your research before committing to anything. For this reason, there are some crucial steps to take:
First and foremost, take stock of all your income and expenses and determine how much you are able to repay each month. Choose a non-bank loan only for important purposes. These definitely do not include summer holidays or Christmas presents.
Study the range of non-bank loans carefully and compare them with each other. You can either do this yourself or you can opt for the comparison offered by many comparison portals. At the same time, check out all the options , for example by looking for reviews.
Tip: Check whether your chosen non-banking company has a licence to provide consumer credit from the CNB and avoid those without licences.
Calculate how much the interest works out to, how much you will pay in total at the end and determine which option works best for you. You can get help from a financial advisor who can best assess your financial situation, available options and future plans.
Before you sign the contract, read it thoroughly and, ideally, have it reviewed by our attorney. This is the only way to make sure that you are signing what you really think you are signing and that you are not being deceived. You’ll have a solution within two business days, plus you can resolve everything online from the comfort of your own home.
Should problems arise that, for example, prevent you from making your repayments on time, it is definitely not worth playing dead and hoping that the problem will resolve itself. In this case, you need to take action as soon as possible and agree on the next steps with the non-bank lender.
Similarly, if you suspect that the non-banking company is not acting in accordance with the contract or is acting illegally, do not wait for anything and contact our solicitors. At Dostupný advokát, we are ready to fight for your rights. We will assess your chances of success in court and propose a solution that will lead to the best possible outcome.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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