People applying for a home loan (but not only) may come across a term such as a credit promise or, interchangeably, a bank promise. This document is issued by financial institutions at the request of the client, and many people believe that its receipt guarantees the granting of a loan. Unfortunately, but this is not true, as discussed in today’s post.
Mortgage loan. A time-consuming and quite complicated process
A home loan is a commitment that is often taken out for several decades. It is also characterized by a significant value, which in 2021 averaged 330 thousand zlotys. The process of obtaining a mortgage itself is quite complicated and also quite labor-intensive.
Banks must protect their interests well, after all, they are giving a large loan to a person who has only a steady income and a certain creditworthiness. This brings with it risks, which are minimized by the establishment of a mortgage on the financed apartment and possible insurance, which is also intended to reduce the risk of the financial institution.
Obtaining a mortgage itself usually takes from 4 to as long as 12 weeks, but much depends on both the number of loan applications submitted to a given bank in that time, as well as the borrower’s situation and whether he or she adequately prepares for the entire process.
This is because it is necessary both to estimate the creditworthiness itself, but also to submit to the bank the relevant documents related to the property one wants to finance with a mortgage. If the borrower fails to provide any of these, the entire process will be significantly prolonged, and this may cause the dream apartment or house to simply disappear from the market.
However, this is not the only reason why an apartment or house can be “cleaned from under your nose.” Many developers, in order not to block apartments for reservation by people who will not ultimately obtain financing, expect a so-called promise of credit. This document is supposed to carry a kind of certainty that a person interested in an apartment will receive a loan for its purchase.
What is a credit promise?
A credit promise, interchangeably called a bank promise, is a document that confirms the creditworthiness and willingness of the issuing bank to grant financing to the person who has applied for it. This means that if the bank issues a credit promise, it confirms in this way the possibility of the interested person receiving a loan, for example, to purchase an apartment, car or other valuable good.
It should be borne in mind that a credit promise is issued only at the request of the customer, and in order for the institution to do so, it is necessary to examine the creditworthiness and history of the customer in question. The analyst will take a fairly close look at both the customer’s income and living expenses, as well as x-raying the credit history. If all goes well, the bank will give a credit promise.
Many institutions expect a fee for this document, but everything depends entirely on the bank’s credit policy. Some institutions will not charge you a penny, because in this way they can keep with them a customer with a real interest in a usually “profitable” loan.
Is a bank promise a guarantee of getting a loan?
It is quite common to encounter the statement that since the bank has issued a loan promise, we have financing “like in the bank.” Unfortunately, but this is only a theory. In fact, a thorough analysis of the borrower’s financial capabilities is performed for the purpose of granting a loan, and the bank thus confirms its readiness to finance, for example, the purchase of an apartment, but this does not mean that the promise gives a 100% guarantee. Why? It already depends on several factors. These include, among others:
- a change in the material situation of the person interested in financing;
- the appearance of negative entries in the Business Information Offices (KRD, ERIF, BIG Infomonitor);
- lowering of the BIK score (scoring), for example, due to delays in payment of other installments at the time;
- a property that the bank is completely uninterested in financing (e.g. due to location, technical condition, etc;
- the introduction of new regulations on lending (new recommendations of the Financial Supervision Commission).
And just as we have no influence on the last one, and the Commission itself usually does not introduce too frequent and strongly radical regulations, the others, for the reasons mentioned above, are decided practically by ourselves. Default on some obligation or late payments on loans will effectively derail the possibility of receiving financing, despite the promise of a loan. The situation will be similar if our BIK score drops significantly.
Does every bank issue a credit promise?
If our goal is to purchase a property, it is worthwhile, while still at the stage of searching for a property, to look around to see what the issue of a credit promise looks like in various banks. Admittedly, most institutions will easily issue such a document at the request of a person interested in financing, but there is no law that forces banks to do so.
Therefore, it may turn out that, although you have managed to find an interesting apartment, you will have to search in a hurry for a bank that will easily issue a promise expected, for example, by the developer. This, in turn, may cause you to choose a credit offer that is much worse than in other banks, and in this way you can lose even tens of thousands of zlotys over the entire repayment period.
How to get a credit promise?
A credit promise is a certificate that can significantly facilitate the purchase of a property, but is not equivalent to a guarantee of a loan. It is an official promise by the bank to grant a loan for the amount requested, confirming the consumer’s creditworthiness. If you are planning to buy a property, it is worth going to the bank to calculate creditworthiness and obtain a promise. In this way, the seller will have confidence in our ability to repay the loan. However, it is worth remembering that a promise is not a guarantee of obtaining a loan, but only a temporary confirmation of creditworthiness. There are different types of promises, some are more general, others are more specific and apply to a particular property. If you do not get a promise, it is worthwhile to carefully analyze your financial situation and possibly consult a specialist.
How much does it cost to issue a loan promise? What is the waiting time?
A credit promise is a document that confirms a customer’s creditworthiness. In the past, the cost of a credit promise could range from PLN 50 to as much as PLN 300. However, nowadays, thanks to the automation of many processes in banks, most banks in Poland do not charge for issuing a credit promise. In the case of investment loans, the promise may be a tax-deductible expense.
The issuance of a loan promise is not an instant process. The bank must carefully analyze the customer’s income and expenses to assess his creditworthiness. The waiting time for a loan promise can be up to 2 weeks. This time depends on the bank’s internal policies and the customer’s individual financial situation. Once issued, the promise is valid for about 30 days.
What exactly does a credit promise contain?
A credit promise is a bank’s promise to grant a loan of a strictly specified amount, provided that the potential borrower meets the established conditions. Here are the main elements that a credit promise contains:
- Bank data: Name of the specific bank, address of its headquarters, KRS, NIP, REGON.
- Details of theapplicant: Name, surname, address.
- Conditions necessary to meet: These specify what the applicant must meet in order to receive the loan.
- Amount ofmaximum loan: Specifies the maximum amount the bank is willing to lend to the applicant.
- Theexpiration date of the promise: It is usually 30 or 60 days.
- Seal of the bank and signature of the authorized issuer of the document: These confirm the authenticity of the document.
- Information clause: It specifies in what cases the document can be invalidated, such as when the bank reveals that the data provided by the applicant is false.
It is worth noting that a credit promise does not guarantee that the applicant will receive a loan. It is only a temporary confirmation of the customer’s creditworthiness.