Are you thinking about taking out a personal loan?

Personal credit falls into the group of consumer credit, intended to finance the acquisition of goods and services, such as household equipment or education and health services. It can also be contracted without a specific purpose.

It is a credit contract in which the amount, term, and repayment method of the loan are defined upfront.

To be eligible for a personal loan application, you need to:

- Be over 18 years old;

- Have a bank account in Portugal;

- Have verifiable monthly income;

- Not have any missed payments.

The amounts to be financed start from 200 euros but actually tend to begin at 2,500 euros up to 75,000 euros; however, these amounts may be limited by your effort rate or the value of the asset/service acquired.

The financing terms can range from 12 to 84 months. Depending on the purpose or asset/service to be financed, the financing term may be subject to a shorter period than desired.

Credit institutions cannot grant personal loans where the APR exceeds the maximum value in force. The maximum rates are set based on the purpose of the loan. The rate applicable to your loan also depends on your risk profile analyzed by the institution granting you the financing.

The APR is normally used to compare credit proposals. For credit proposals with the same amount, term, and repayment method, the proposal with the lowest APR is the cheapest for the customer.

The calculation of the APR includes:
- interest;
- commissions;
- expenses, namely taxes and fees related to the registration of the mortgage, in the case of a mortgage-backed loan;
- the insurance required to obtain the loan;
- the account maintenance fee, which is mandatory for managing the loan;
- the remuneration of the credit intermediary, if that remuneration is paid by the consumer, which happens when resorting to a non-tied credit intermediary;
- other charges associated with the credit contract.

It does not include:
- amounts to be paid if the customer does not fulfill obligations set out in the contract;
- early repayment fees for the loan;
- notary costs.

The APR differs from the nominal annual rate (NAR) by accounting for, in addition to the interest on loans (expressed by the NAR), all other charges that the customer will have to pay for the credit.

The MTIC is especially relevant at the time of contracting the credit. Throughout the term of the loan, the interest rate or other charges may change.

For example, in loans contracted with a variable or mixed interest rate, the MTIC is only indicative. Since, in these loans, the interest rate may vary over time, the MTIC may not correspond to the total amount that the customer will pay during the term of the loan.
If the other characteristics of the credit are similar:

A credit with a higher interest rate will have a higher MTIC, since the interest paid will be higher;
A credit with a longer term will have a higher MTIC, because more interest will have been paid for that credit than for a similar credit with a shorter term.

Where can I check the MTIC?

The MTIC of the credit is indicated in the pre-contractual information provided to the customer, that is, in the so-called “FIN – standardized information sheet,” in the case of consumer credit, in the section “Total amount charged to the consumer”;

Before taking out a personal loan, you should take some precautions, namely:

- Be wary of scams, always ensure that you are dealing with a credit intermediary registered with the Bank of Portugal;

- Carefully assess whether you actually need this loan, as it is something you will have to manage for a period that may extend up to 84 months;

- Calculate the impact that the installment of the new financing will have on your budget, especially in cases where you are already paying other installments. If the total of all your monthly installments exceeds 35% of your income, be extra cautious and consider contacting a credit intermediary;

- Compare several credit proposals and analyze the associated costs;

- If you are taking out a personal loan to pay off other loans, be especially careful; we strongly recommend that you contact a credit intermediary who will help you with specific solutions for that purpose.

To apply for a personal loan, you will need:

- Copy of citizen card;
- Proof of address (water bill, electricity bill, etc...);
- Proof of NIB;
- Copy of the last 3 pay slips;
- IRS declaration from the previous year;
- IRS settlement note;