Every person who takes a loan from a bank is a borrower. Find out what a borrower is required to do and who can become one.
Who is a borrower? Definition of the term
A borrow er is a person who takes a loan from a bank or other financial institution. The borrower is obliged to repay the loan with interest within the prescribed period. A borrower can be an individual or a company. The borrower must have sufficient creditworthiness to obtain a loan. Creditworthiness is the maximum amount that can be obtained in the form of a loan. It depends on a number of factors, such as income, age, marital status, having children and others. The borrower is also required to document his income and have a steady source of income.
Borrower – what is he obligated to do?
First of all, the borrower is obliged to pay the loan installments on time. Late payment of one installment results in penalty interest, and several months of default on loan repayment may result in bailiff enforcement. The borrower is also required to take out life and unemployment insurance, if required by the bank. If the borrower dies, the loan is repaid by the insurer.
Who can become a borrower?
Borrowers can be both individuals and business entities. For individuals, credit requirements may vary from bank to bank. Most often, however, the borrower must have:
- identity card,
- a steady source of income,
- no negative credit history.
Individuals who want to apply for a loan must meet certain conditions. These are:
- age (property insurance),
- marital status,
- employment,
- material status.
Individuals who apply for a loan must have a steady source of income. This applies to both salaried and self-employed individuals. The borrower must also meet certain age conditions – usually 21-65 years. In addition, banks often require borrowers to have insurance in case of job loss or other source of income. Loan applicants must also meet certain conditions of marital status. For mortgages, banks often require that the borrower be married. For cash loans, on the other hand, there are usually no such requirements. Loan applicants must also have a certain financial status. Banks often require borrowers to have a permanent residence and their own car. In addition, the borrower must have adequate collateral for the loan, such as real estate.
