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Loans to legal entities: types and conditions

Economic development is directly dependent on business development. And for its continuous development, many businesses do not have their own resources. To this end, banking organizations offer the use of loans to legal entities. And with the help of borrowed funds, it will be possible to arrange the purchase of equipment, acquisition of real estate, etc. Read more at pangu.us

Acquisition properties

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Obviously, the conditions for lending legal persons endowed with its own characteristics. And the process of providing this service is strictly regulated. Therefore, if a company has a need for money, then you have to get it, you have to meet a number of requirements.

Each financial institution has its own lending rules, which may differ significantly from those of providing a similar service at another bank. Therefore, the first step to be taken is to select a bank for loans to legal entities with appropriate conditions. Once you have selected conditions that are right for your company, you can start collecting the necessary package of documents.

Important conditions

Important conditions

First, the banking organization checks the future borrower for credit history, which should be positive for known reasons. Obviously, neither bank would accept the risk of granting a large loan to a person who, under the terms of the previous agreement, had a serious delay in payments or was not repaid at all.

To this end, an assessment of the financial situation of an undertaking is made on the basis of the accounts and financial statements presented, which is a bank statement showing all types of transactions that have been carried out on the account for a certain period.

Often there are cases where the aim of the proposal is the best option of lending legal entities by a banking organization is to require the debtor to be transferred to his service. Therefore, most often the application for credit funds in your bank is the most optimal offer.

Bank loans to legal entities require the following standard conditions:

  • Offering many banks for those who have an open account is an opportunity to use a short-term overdraft. Such a proposal involves regular replenishment of the account with borrowed funds allocated by the debtor for various purposes. Payment from this loan will be deducted automatically from the company account upon receipt of funds.
  • Creating a credit line – considered an optimal credit product. Individual conditions are chosen for each business, so they should be discussed separately with a specialist in the credit department.

Banking organizations express their loyal customers because they are well aware of their financial reputation and business characteristics. Banks offer some businesses the use of targeted programs, under which borrowed funds can be used to purchase equipment, purchase expensive items that most often act as collateral.

Also, recently, successfully to create a program for refinancing loans opened in other banks. Approval will be guaranteed in the case of timely payment of funds for a long time. In other words, with many of the necessary conditions that are appropriate for established banking rules, you can go through the process of lending to individuals and legal entities.

Advantages and disadvantages

Advantages and disadvantages

The indisputable advantage of lending to legal entities is:

  • The ability of a legal entity to receive a really large amount of money and direct it towards business development.
  • As a client of the bank in which you are applying for a loan, you can reduce the processing time of documents.
  • Investment loans can be used to modernize or expand own production.
  • Equally advantageous are banks offering flexible credit terms and individual repayment arrangements.
  • Since the collateral can become not only the property of the business but also the property of the business owner, it is also possible to use the goods in circulation and even claims.

Disadvantages of obtaining loans by legal entities include:

  • Collection of a large package of documents.
  • Without collateral or guarantee, the interest rate will be significantly increased.
  • Time-consuming design.
  • The mortgage has a high price.
  • The higher the loan amount or maturity, the more expensive the financial resources will be.

Types of loans

Types of loans

Banks offer different types of loans to legal entities. Each type has its own design characteristics, repayment and use. When selecting a particular type of loan product, it is useful to understand the purpose for which the borrowed funds are required. What product options can banks offer:

  • Credit line – with such a loan regular replenishment of working capital. The use of these funds can be used to pay for goods (services) or finance ongoing expenses in agreements with suppliers. This type of loan is renewable or non-renewable. The interest rate is fixed or floating. The registration of such a line does not require the provision of collateral, but by providing any value the borrower will receive from the bank the opportunity to obtain a loan on more favorable and optimal terms.
  • Budget Loans – Registration of these loans includes state support. Offered to companies that have signed government contracts (guarantees).
  • Urgent loans – to quickly receive the required amount of cash.
  • Express loans – are expensive loans because the interest in them is really high. Their advantage is the high speed of spending money to pay for any goods, components or raw materials.
  • Overdrafts – this type of loan is preferred by most large companies. The advantage of such a loan is the regular replenishment of the account with borrowed funds in the required amount. The disbursement of such a loan is made at the expense of the enterprise by debiting the funds from the account in automatic mode.

Interest rate

The overpayment of the loan is directly dependent on the interest rate. And today the average interest rate offered by a legal entity is approximately 18% and the fact of providing collateral is not important. This interest rate may be reduced in the following cases:

  • The debtor is a regular customer.
  • Provision of collateral.
  • Long formed a business relationship.

Requirements for debtors

When applying for a loan, each bank sets its own lending conditions for legal entities, but as regards the main points, they are the same:

  • Only the business owner or entrepreneur can become an applicant. It is possible to attract a guarantor.
  • The applicant must be at least 18 years of age.
  • An analysis of the company’s financial activities should demonstrate a breakthrough operation of at least one year.
  • The geographical distance between the company and the bank should not exceed 150 km.
  • A prerequisite is the presence of positive credit history. This item is subject to a thorough review by the Banking Security Service.
  • Even if the company does not meet every bank’s requirements, it can still obtain approval to receive funds. At the same time, however, under the terms of the contract, the interest rate and the loan period will be overestimated.

Registration documents

Registration documents

As mentioned above, lending legal persons in Russia will require a lot of strength and patience from the debtor. The preparation of the package of documents required for submission to the bank is time-consuming. At this stage, it is necessary to:

  • Fill out a request for funds in the form of a banking organization.
  • Prepare copies of the passport of the chief accountant and the business owner.
  • IFTS Registration Certificate.
  • Legal package of documents.
  • Extract from the registry.
  • When providing real estate as collateral, also submit documents.
  • Package of financial documents to confirm the efficiency of the company and its stable condition.
  • Contracts with various counterparties.

Each bank represents its limitations on the amount provided. The minimum amount for a loan is usually 300,000 dollars, and the maximum amount to be taken can even be 150 million dollars. The granting of a loan largely means the transfer of securities to a bank, subject to the guarantors being attracted.

Loans without credit check for the indebted

 

Recently, more and more non-bank institutions operate in the country, which grant loans via the Internet. One of the most popular loan offers is a “no loan” loan addressed to indebted persons. A person in debt is one who does not repay their loans, does not pay maintenance and those who are in arrears with rent or telephone charges. Put simply, a person in debt is a person who has had problems with repayment in the past. A person who has a negative entry in the Credit Information Bureau or a note about indebtedness in the National Register of Debtors is crossing out the chances of getting a loan from a bank. In this situation, non-bank companies come to the rescue.

Loans for those in debt in many parabanks are granted without credit check. This loan is intended for financial assistance for people who, unfortunately, are already in debt and do not have a clean credit history.

Can the debtor apply for a loan?

Can the debtor apply for a loan?

Getting a loan appearing in the debtors’ registers is not a simple task. Virtually every lender uses at least two registers, verifying their clients before granting them a loan. In this case, the indebted persons can take advantage of loans without credit check.

The fastest and most convenient form of financial support are loans via the Internet, because you can arrange everything without leaving your home. Online loans are not only convenient, easy and on favorable terms for the borrower, but also completely secure. Loans for the indebted include payday loans, unsecured loans, private loans, ID cards and more.

Contemporary non-bank companies have a special loan offer without debt for the indebted, on average they are offered up to USD 6,000 for 1-2 months, but there are institutions that grant up to USD 10,000. Anyone can apply for a loan without credit check. It is enough to be a citizen, have an income that in many cases does not have to be documented and be over the age of 18. Non-bank loans are used by people who care about time and need a small amount for a short period of time. They are also used by people who have a negative credit history or appear in the debtors’ registers.

A loan without credit check can be used for any purpose. Many people devote it to car repairs, vacation and renovation.

What is the debt security?

What is the debt security?

Reliable non-bank companies, guided by a responsible lending policy, cannot make money available to someone who does not have adequate financial security. In the case of indebted persons, another loan could lead to a loss of financial liquidity and leave the potential borrower without a livelihood. In the case of non-bank loans, such collateral is usually:

  • car pledge – If you decide to take out a car loan, you will need to sign a contract to transfer the vehicle through the loan institution. Based on this document, the lender becomes the owner of the client’s car by 51%.
  • third party surety – deciding on such a step, the indicated surety will be burdened with the necessity to settle the borrower’s debt at the moment when he stops paying it off.

The above loan options give you the opportunity to borrow money even if the financial situation of the potential borrower does not look very interesting. When deciding on such solutions, however, you must remember that they are subject to considerable risk. In the case of a car loan, you can lose it, and choosing a loan with a guarantee also puts the other person in trouble.

Loans for people with a bailiff

Nowadays, every person will get a loan, no matter how difficult they are. Sudden financial need can happen to anyone. The only way out of a difficult situation is to take a loan from a bank or non-bank institution.

There is a lot on the market of financial services offered by non-bank institutions. People who have a bailiff can also borrow money. Some non-bank institutions offer loans to those in debt with a bailiff. Currently on the Internet you can find a lot of websites with comparison websites of this type of offers. All you have to do is sit down in front of the computer and find a company that will meet several parameters.

First of all, the company cannot check the database. Because if our report in the Credit Information Bureau is checked, the lender will reject our application due to the high delay in paying the previous commitment. The next requirement is a different payment method than the bank account. Bank transfers are usually blocked by a bailiff, so the money you borrow would be seized immediately. The last condition is the possibility of repayment via postal or other transfer, without using banks. There are currently many loan companies that meet these conditions and lend to people with a bailiff,

Can I get a loan with a bailiff?

Can I get a loan with a bailiff?

The moment when the bailiff takes up your salary, retirement or bank account is worrying. Families with many children, which usually cannot cope with paying off debts, have the biggest problems. The reasons may be dismissal, illness, accident or other unexpected circumstances. You can get out of any situation, which is why an online loan with a bailiff is an ideal product for those who want to go straight and regain comfort.

The most sought-after in the network is a non-bank loan for indebted persons without credit check, a loan without verification in the debtors’ databases. A loan with a bailiff can solve financial problems and help you pay off your debt.

Of course, before submitting your application, you must first read the terms of the loan carefully. We should be interested not only in such parameters as interest rate and repayment period, but also in the requirements set by the company to a potential lender. Some non-bank companies that provide services such as loans with a bailiff require, for example, a property certificate or require a guarantor.

What conditions must be met?

What conditions must be met?

Persons with bailiff activities can apply for a non-bank loan online. A loan with a bailiff via the internet is addressed to virtually all customers whose property or salary has been taken over by a bailiff. Therefore, they do not have to have an impeccable history in credit checker. Another convenience is also the fact that there is no need to provide employment contracts and any income statements from ZUS or Tax Office. However, even if you apply for a loan with a bailiff, you must meet several basic conditions, such as:

  • nationality;
  • valid ID card;
  • registration or permanent residence in the country;
  • meeting the criterion of age range, usually from 20 to 70 years old;
  • Have a personal account in one of the banks;
  • you must have credit standing;
  • You should have a mobile phone with a number and an email address.

Best loans and their characteristics.

Loan is not a gift

Loan is not a gift

It is generally not possible to determine which loans are really the best for consumers by comparing them online. To do this, a number of offers must be obtained from various banks after the selection, in order to be able to compare exactly what percentage of interest and processing fees the borrower really has to pay and possibly have to take out residual debt insurance to hedge the risk become.

The loan that ultimately results in the lowest loan costs will then be the best loan in this sense. Another option is the loans offered by some furniture stores or electronics stores and car dealers where the customer does not have to pay any fees. These are always loans that are mathematically one of the best loans, but with a restriction if consumers only buy certain consumer goods because there are no additional costs when taking out the loan Worth considering whether these things are really needed.

The electronics stores and furniture stores offer customers such opportunities to ultimately promote sales of their products. A loan is not a gift, the installments must be paid back in any case. Consumers who budget responsibly with their finances and think about what they need, what things they can do entirely without and which are only acquired at a later point in time and then act accordingly when making their purchase decisions, will always be the best Find loans. Every loan that is taken up puts a strain on the household budget because it has to be repaid and the installments then have to be paid month after month over several years.

Loan that consumers should take out

Loan that consumers should take out

The financial scope within the monthly budget is getting smaller and smaller due to several loan commitments. In order to illustrate this, a loan for a vacation trip, for example, can not be cheap, the vacation loan itself is not a loan that consumers should take out. The money for the vacation should always be saved in advance. Anyone who finances their vacation with a loan should only reasonably choose a term of up to 12 months so that this loan is repaid before the next vacation is due. Anyone who practices this differently usually does something wrong in their financial planning.

In the end, what can lead to the risk of overindebtedness sooner or later. So it is fundamentally wrong just because the loan seems cheap to finance all possible consumer goods and thus to live in a certain way over the circumstances. Many consumers only notice the error when it is too late or when a change in their lives, such as unemployment or divorce, worsens the financial situation and the obligations can no longer be met. There is nothing to be said against well-planned and appropriately prepared borrowing, especially not when purchasing is important, but the best loans are those that you do not have.

Get money with paperless mini-credits.

Paperless Mini Credits are a fast and reliable solution to get money.

Paperless Mini Credits are a fast and reliable solution to get money.

It is no secret to anyone that times of economic difficulty tend to come at the worst time, just when you are going through a complicated situation from a financial point of view, making it necessary to let creativity fly to give you an efficient but above all fast solution. and safe.

And it is that when talking about economic difficulty there are hundreds of reasons that can cause it, from being unemployed, a breakdown in the car, expenses in studies and even an unexpected move.

Although many have the backing of a credit card or an extra budget, the reality is that this is not a recurring trend in the majority of the population.

Crisis response

Crisis response

Grandparents said that in great crises incredible opportunities can also appear, so you can always look for alternatives that allow you to respond and succeed in any unforeseen event, especially if it is about economic issues where it could be said that every day counts to give solution.

When money is needed, there are several options to consider, so each one will decide the one that best suits their particular case. In addition to credit cards, there are other financial instruments that help solve and these are exactly the online paperless credits.

Credits without documentation as an alternative

Credits without documentation as an alternative

When speaking of paperless credits, most will relate them to traditional banking institutions, that is, large corporations that are present in different countries and that practically live on their portfolio of liabilities, that is, on clients who incur debts. Although in the past they could have been a very viable alternative, since it was the only one, today it is different, especially for reasons of time and practicality.

It is no secret to say that when you have intentions of accessing a bank loan, the first thing you should have is patience and then, a lot of time available. Apart from all the requirements, many of them completely useless and even difficult to achieve, the reality is that the response times are very long, not to mention eternal.

First of all you have to pay a visit to the bank branch to know the list of requirements and required procedures. After everyone is reunited, a new trip to enter the folder, wait for the call, and go back to sign the contract or debt commitment letter.

In the midst of all this process, it may be that many of these required papers expire and it may be necessary to process them again, not to mention that changes are always present, be it a signature, a form in short, all this for many times and after so long, the answer is negative or the amount is less than expected.

The renewal of the financial market

The renewal of the financial market

As in most sectors of society, the development and advancement of technology, and more specifically the Internet, has also been reflected in the financial market. Now it is possible to access mini credits without paperwork online and with all the certainty that the application will be reviewed.

Even this system is proving to be more effective than the traditional one since the request, analysis and response times are so fast that there is practically no point of comparison.

Easy, simple and fast

Easy, simple and fast

In the first place, it is necessary to say that anyone has the same opportunities to access this type of benefits, that is, from students or recent graduates of the university, unemployed and even older adults, without having a credit history or even being in an Financial Credit Institutions listing.

The applicant only needs to have a computer or mobile device with an Internet connection, enter the platform and establish the amount of money required. After this, you must fill out a fairly simple form where you must include your basic data and present some supports such as a copy of the DNI to demonstrate that you are of legal age, bank account number where the money will be deposited and number to notify the response.

Regarding the financing conditions are clear, here there are no variable interest rates, much less special fees, everything is clear from the beginning.

As if that were not enough, just as the client establishes the amount of money he needs, the same happens with the time to pay it, and can go from one to six weeks, without this representing an increase in the interest rate.

After the appropriate steps in just 15 minutes, the verdict of the request can be obtained, which in most cases is usually positive. But on top of all this, paperless mini credits are available year-round, every day of the week, even on holidays.

Accounting for loans and borrowings in accounting

Accounting – a procedure in which business financial services registers reflect borrowing and lending transactions. What is the specificity of these records? Through which accounting are long-term liabilities and short-term loans and loans reflected in the accounts?

What is the difference between a loan and a loan?

What is the difference between a loan and a loan?

First, we study some of the theoretical accounting of the liabilities. Before you consider implementing loan accounting and loans, you can see the differences between them. These criteria can be identified by reference to the provisions of Russian civil legislation.

As regards the loan: in accordance with the agreement, one party acting as a lender transfers ownership of money or other resources to another business entity – the debtor and the other returns the property to the former or equivalent property.

Credit agreements can be signed by both organizations and individuals. This Agreement must be in writing unless otherwise provided by law.

A Contracting Party may be a Contracting Party of any citizen or organization. Operations of the corresponding type are not licensed and are generally not limited. For example, in a manner governed by civil law, a loan can be obtained from the founder or partner organization.

A loan is a loan that can only be provided by an organization in the state of a financial institution, provided that it obtains a license from the Central Bank of the Russian Federation. Loans, in turn, are based not only on the standards of the Civil Code of the Russian Federation but also on other financial sources of law.

However, they should be provided only on the basis of a written contract. Bank loans are generally considered urgent and include interest payments.

The agreement between the financial institution and, in many cases, the borrower provides for a corresponding loan with any asset, guarantee or special contract with the insurance company. The basic differences between loans and loans are therefore that the first type of liabilities:

  • arise from the conclusion of a contract with a specialized financial institution licensed by the Central Bank of the Russian Federation,
  • involve the transfer of the creditor to the debtor in all cases of cash;
  • they arise as a result of the conclusion of a written contract between the parties.

The contract between the lender and the borrower sets out all the basic terms and conditions of the loan: the amount transferred from one party to the other, the amount and conditions for calculating interest, interest.

The subject of accounting operations with loans in accounting

The subject of accounting operations with loans in accounting

 

Now consider what objects can correlate accounting loans and loans in accounting. The main ones are commercial transactions arising from the performance of a contract by an undertaking whereby one entity – the creditor or the creditor – transfers, as noted above, the ownership of the other to the debtor, money while the other undertakes to repay the first amount withdrawn and set by agreement – also interest.

In some cases, it may be the subject of an agreement to be a certain tangible object – real estate or equipment, a mental product (such as software). In exceptional cases, it is assumed that the debtor repays less than the amount withdrawn under the contract.

This is generally possible if the parties to the agreement are the central bank of the state that has adopted a policy of negative interest rates and private financial institutions. In Russia, the central bank’s key rate is now relatively high, so loans issued between different market participants almost always involve interest payments.

Accounting for loans and borrowings in accounting carried out in special accounts 66 and 67. The first reflects operations with short-term loans, the second – long-term. The relevant accounting procedure is approved by a separate source of the law – PBU 15/2008. We will study in more detail how these procedures are carried out under the provisions of regulatory legislation.

Accounting for borrowing operations in accounting: regulatory framework

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In accordance with the legislation under which loans and borrowings are accounted for in the accounts, the amount of an enterprise’s liabilities – if acting as a debtor – is reflected in the accounting records based on the content of the contract with the creditor. Information on loan repayment conditions should also be published in the news sources.

Loans and loans are divided into 2 types – short-term and long-term and their accounting is carried out on the above accounts. The cost of borrowing should be reflected in the accounts separately from the amounts raised under the loan agreement. These costs are reflected in the accounting documents for the period in which they occurred. They should also be equally included in the other expenditure structure of the organization.

The use of special accounting accounts amounts corresponding to the principal or interest on long-term or short-term loans or credits are generated using accounting accounts. Consider their specifics.

Loans: many in Italy but still low interest rates

Currently almost 40% of the Italian population has at least active funding. We speak for the accuracy of 39.4% according to the analyzes conducted by CRIF, a company specialized in credit information systems. The data refer to the first six months of 2019, and mark an increase of 8% compared to the same period of the previous year. The number of Italians applying for a loan therefore increases, yet the average installment that is paid decreases, which is now $ 344 (a drop of 1.5% compared to the first 6 months of 2018).

You will find plenty of loan offers on the internet. Depending on whether you want to apply for a quick loan, the so-called payday loan or non-bank installment loan, you will receive different parameters and loan terms. You can apply for each of these products online. Check what are the advantages of this solution.

The reason for the large demand for loans from Italians

The reason for the large demand for loans from Italians

It is probably the interest rate which continues to remain reasonable. Many therefore decided to take the plunge and launch, for example, in the purchase of real estate, cars, motorcycles or consumer electronics.

Beatrice Rubini, director of the CRIF Mister Credit line, believes that the decrease in the average installment and residual exposure are evidence of a certain sustainability of consumer debt. In short, there are ideal situations to take advantage of the loans and get some thoughts out of your head. Several people who use the same tool are testimony to a mechanism that works and is capable of satisfying consumers.

 

Loan options

Loan options

It seems that the targeted loans are the ones that are the most popular, representing 45.5% of the total. The loans aimed, we remind you, are those intended for the purchase of a particular good or service, such as a car, a motorcycle, household appliances, consumer electronics, furnishings or travel.
Then there are personal loans, those that do not require a specific purpose, and which represent almost 33% of the total. Tuscany is the region with the highest percentage of citizens having at least active funding, with a significant 44.2% of the population. Follow Sardinia, Friuli-Venezia Giulia, Lazio and Valle D’Aosta. The tail of Trentino Alto Adige, where only 20.2% of the population has applied for loans and finds itself with active financing.
Finally, the mortgages for the purchase of real estate, with 21.7% of the cake, close the ranking.

The irresponsible loan returns, but now for consumption

The serious economic and political consequences of this crisis have not served for the legislator to adopt effective measures to avoid what constitutes one of its most relevant causes: the high-risk loan and the over-indebtedness of individuals, which, in turn, favors the increase in public debt and the consequent restrictions on the welfare state.

It is not that “banks are bad” it is that regulation is bad. A regulation that continues to be inefficient and generating perverse incentives for credit market operators.

Prevent financial crises

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Failure to take effective measures to prevent financial crises is very serious. History has taught us that wars and totalitarian regimes have arisen precisely after a powerful economic crisis. And this seems logical. When citizens have “nothing in their pocket”, they have “nothing to lose”, populist messages penetrate with greater intensity. And this is what is happening to us here. Populism is at home …

The facts prove this claim. As it happened in the years before the crisis, again, the Capital Lender begins to alert but is now focused on consumer credit, highlighting the extraordinary growth that consumer credit is having in Spain. Something that the Fine Bank has already denounced in a report where it highlights that ” consumer credit is registering double-digit growth rates in Spain “.

In fact, the European Commission is already evaluating the impact of the Consumer Credit Directive with the aim of evaluating future reforms in this area. As with the Mortgage Credit Directive, the wide margin-left to the Member States is testing its real effectiveness. The mortgage loan will be evaluated before March 2019, as stated in its article 44, probably before its transposition has been approved in Spain….

Spain is a manifestation of “light regulation” of responsible lending, which was one of the directive’s objectives. The most serious thing is that the Capital Lender itself recognizes its powerlessness to veto credit growth. It says so, even though it can decree the increase in bank provisions. Of course, there is no helplessness to rescue poorly supervised financial institutions with public money.

The possibility of increasing provisions or the eventual imposition of administrative sanctions has not been sufficient measures to stop a scandalous increase in consumer credit, which has shot up 40% in just three years and also delinquencies that amount to 8.6%.

As reflected in the GFI report, Spain is the EU country where consumer credit is growing the most. That the Good Finance is in negative rates may have something to do with this increase, since this type of loan allows financial institutions to set higher interest rates. In fact, in Spain, the interest rate in consumer credit contracts is 60% higher than in the EU.

We have more consumer credit, more delinquencies and the highest interest rates in the EU. All this together with a significant decrease in the household savings rate that is only 4% of their disposable income.

What does this data show?

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That financial institutions still do not have sufficient incentives to grant loans in a responsible manner. The first regulatory failure is that the Consumer Credit Law (LCC) establishes only administrative sanctions in the event that irresponsible loans are granted, that is, granted to people without sufficient repayment capacity.

The contracts concluded in these circumstances are fully valid and the consumer will be obliged to fulfill them. What incentive does a consumer have to report an irresponsible loan if, if their claim is estimated, it has no effect on the contract concluded with the financial institution?

In other legal systems, the irresponsible loan has contractual consequences and is enforceable by way of exception to the creditor when it claims compliance with the debtor. The judge may deprive him of the remuneration and default interest if he considers that the debtor was not solvent at the time the loan was granted.

Obviously, these effects do not occur when insolvency is the consequence of supervening circumstances of the debtor (unemployment, illness …). No liability can be attributed to the entity when the insolvency is the result of the “bad luck” of the debtor. In this case, we have the possibility that the debtor is exonerated from the liability in a bankruptcy procedure through the second chance regime. What is clear – and the facts prove it – that the administrative sanction of the irresponsible loan is inefficient.

But for an adequate responsible loan regime to be designed with contractual effects, it is necessary for the judge to be able to assess the data that the entity has handled when granting it. And, above all, financial institutions must have access to reliable solvency data. Otherwise, they will always hide behind this lack of information to exonerate themselves from responsibility, transferring it to the consumer who is the “owner” of their data.

And at this point is where the second major regulatory failure is evident: the deficit credit information system, that is, the one that determines the access and flow of wealth solvency data and whose objective is to discipline the credit market: preventing Consumers overindebted, compromising the solvency of financial institutions as a result of high delinquencies.

This key issue is poorly regulated in Spain. As much as the entities have an obligation to consult the Good Finance Investment Corporation (GFIC), it will only inform them of operations whose accumulated risk exceeds 9,000 euros.

Therefore, if I, for example, only have a revolving credit card with a limit of 3,000 euros, this data cannot be known by the entities when it comes to lending. If they go to the private credit bureaus, they will find negative information, that is, they will only know if the client is delinquent or not, but not what are the debts he has assumed and has not yet defaulted on.

In Spain there is a lot of asymmetric information in the credit market due to the fact that financial institutions do not share positive information (debts assumed and not yet fulfilled), something that I have already repeatedly denounced in this blog here, here and here. Forcing financial institutions to consult databases with incomplete information is really absurd.

What are the consequences of the lack of reliable solvency data? When the lender cannot distinguish between good and bad payers due to a lack of reliable solvency data, he has two options: either he increases the denials, or he grants the loans increasing the credit cost to all the applicants so that the good payers bear the costs. the default of bad payers.

It is clear that in Spain the second is happening: credit for everyone and more expensive for everyone. And, above all, much more expensive than in the rest of the EU

Have we done anything to improve this regulation?

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Well, PP-PSOE has rejoined to block the implementation in Spain of regulation of positive files, rejecting an amendment presented in Congress (nº 80) by the Parliamentary Group of Citizens that did regulate them in the framework of the recently approved in Congress Draft Organic Law on Protection of Personal Data and Guarantee of Digital Rights.

The amendment to art. 20 which refers to the credit information system has also been presented in the Senate by the Mixed Group (amendment 1). The legitimate interest of the controller must be presumed not only to share negative but also positive data. The approved regulation continues to refer only to negatives. Therefore, more of the same. Entities must be compelled to share positive solvency data.

As I have said, without positive solvency data it is not possible to design an efficient responsible loan legal regime with contractual effects. The problem could have been solved now, but it has not been done, thanks to the opposite position of the two majority parties.

But not only that, nor is the regulation of the obligation to assess solvency having an adequate response. The Real Estate Credit Law Project is still in the process where this obligation must be regulated. As expected, the same rulings are also reproduced as in the LCC: non-compliance is subject to an administrative sanction.

However, it seems that something can change since the Socialist Party (nº 98), Podemos (nº 29) and Ciudadanos (nº 186) have presented amendments in Congress foreseeing the contractual effects for the breach of the duty to assess solvency or the granting of credit when the solvency test is negative.

Hopefully, this necessary change will be approved, but without an effective credit information system that allows entities to share positive data, such a contractual regime will not be very effective either due to the difficulty of verifying the degree of compliance with the obligation to assess solvency, given the absence of reliable data flow.

The consumer cannot monopolize his solvency data by favoring asymmetric information in the credit market. The stability of the financial system is at stake and this will open the door to new financial crises, with the consequent political consequences.

The regulation of the solvency assessment must be the same in both consumer loans and mortgages. Only Citizens has proposed an amendment (nº 186) in such a sense that, given the background, it will most likely be rejected by the other parliamentary groups.

This should be known because the perverse bankers will not be guilty of the next crisis, but, again, a bad and also perverse regulation. Let them not say that we have not warned …