Everything you need to know before applying for a loan - Newport Paper House


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Everything you need to know before applying for a loan

A credit is that amount of money that the bank makes available to us in order to help finance our expenses. There are many types of credit, depending on our needs, and we obtain them after reaching an agreement with a financial institution, which provides us with some liquidity, in exchange for returning the amount that we have used together with the payment of the cost of the loan in the agreed time credit, called interest rate.

What does a credit consist of?

A credit is a limited amount of money that a financial institution makes available to a client during a specific period of time. This may not receive the amount at once, but can use it gradually through a bank account or a credit card, thus managing it according to the needs of each moment.

A loan is not an unlimited source of additional income, since the client, for his part, agrees to pay the amount granted, plus the corresponding interest and other expenses that may be incurred, for example, the cost of an annuity in the case of credit cards. The credits are granted during a specific period of time, and their purpose is to cover current or extraordinary expenses in determined periods.

What are the most common types of credit?

Credits are like a large family, very diverse and heterogeneous, and with the ability to adapt to the needs of each client, whether it is an individual or a company. Thus, there are online loans, requested over the internet, quick loans, those of small amounts granted for a specific moment, the "revolving", which can be used repeatedly up to a limit (as is a credit card), mortgage loans , intended for the purchase of a home, or educational loans, which are intended to pay university tuition, among others.

What do credit cards bring?

You can use the money from a credit through a credit card, as explained in Finance for Mortals about the different types of cards. These are those plastics in which the bank makes available a limited amount of money for you to use on a monthly basis. Thus, it is a way of buying with money that has been lent by the bank, and which you must return at the end of each month. If you do not, you will have to face the payment of certain interest.

What should we take into account when choosing a loan?

Before applying for a loan, no matter what type it is, we must pay attention to the following issues:

Type of interest

It is the extra money that we have to pay to the bank for the credit that it has granted us. The interest rate is generally expressed as a percentage. There are different interest rates (fixed, variable or mixed). In Finance for Mortals you can find out the details of the three types of interest rates.


When applying for credit, the bank can ask us to pay a series of commissions (opening, management...). These expenses associated with the granting of credit are usually expressed as a percentage.

Monthly fee

When requesting a loan we will have to face the payment of monthly installments, as explained in this article from Finance for Mortals. The installments are, therefore, the amount that we have to pay each month and include interest and the proportional part of the amount used of the total credit.


It is the maximum amount of money that the financial institution makes available to us when we request a bank loan.


This concept refers to the deadline after which the credit that has been granted to us can no longer be made available.

When is it convenient to apply for a loan and when is it not?

Applying for a loan is something that can make life much easier, but we must analyze if we are at the right time to request it. For this reason, it is convenient to borrow money when it comes to making an investment, for example, to allocate more resources to the education of our children or to reform the kitchen at home.

Credit and debit: what does each term mean?

When talking about credit, such as the financing that a financial institution grants us -for example with credit cards-, it is important to mention the difference that exists with debit, which represents the money that is our property, that is in our bank account and which we can make use of with a debit card.

And what is the difference between a loan and a credit?

A loan is a contract with our bank. What does it consist of? The entity lends us a fixed amount of money in exchange for us providing as a guarantee of payment, for example, the house or the car that we have bought with said money. However, if what we obtain is a credit, in that case, we can make use of the entire amount offered or only part of it, and it can be renewed, something that does not happen with loans.


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