When hiring a mortgage or a personal loan through a bank, a series of links is often included. You may be asked to open a checking account at the entity, domicile your payroll, hire a card or insurance. The linked insurance serves as a guarantee to the bank in case you cannot continue paying your monthly payments. Therefore, some banks require the contracting of various types of insurance. Normally, hiring additional products at the end will increase the cost of the loan. However, with some links you can save on interest and reduce the total cost of your credit.
Are bindings mandatory?
In fact, except fire insurance, no other insurance is legally binding. Although it is increasingly common to take out more complex home insurance (fire, flood, theft, etc.), the law only requires the contracting of fire insurance when opening a mortgage. The rest of the links requested by the banks are not mandatory, so they usually demand them in exchange for a lower interest rate. That is, the linked products can cause the applied interest rate to be lowered, as well as the total cost of your credit. So, in some cases, it can be profitable to hire them.
What linked products to choose?
Most banks offer a lower interest rate in exchange for insurance linked to credit. Apart from compulsory home insurance, life insurance is the minimum required by most banks. This product serves to ensure the collection of the loan in case of death. Its cost depends largely on factors such as the age, profession and health status of the insured.
Calculate the amount of each monthly payment both with the contracting of related products and without them. This helps you know if it is profitable. If you do not want to join the bank, it is advisable to use the links only when hiring them means reducing the total cost of your loan. Avoid those products that do not give you better conditions.
Consequences of rejecting links
As we have mentioned, banks cannot force you to hire a linked product to grant you a loan. Therefore, the main banking entities market “bonus” credits. The bonus credit is one in which the interest rate is reduced by contracting other products offered by the bank. In the case of not contracting the associated product, the interest rate of the loan will increase.
Another option that the bank has is not to grant you the financing. By analyzing the risks with its own method, the bank can determine that you are not a solvent customer and the credit reimbursement is not guaranteed, forcing you to provide a guarantee or insurance. If you disagree, the bank will inform you that you are not eligible for credit.
Consumer loans without linkages
If you have not achieved better conditions by hiring additional products proposed by the bank, through the internet you can find personal loans without any link, available in minutes. Often, private equity lenders grant personal loans under better banking conditions, without paying commissions or contracting related products.