Credit agreement – general provisions
At the beginning of each loan agreement there is information about the parties to the agreement. Therefore, already at this stage you need to be vigilant and check whether your personal data has been correctly entered in the document. In addition to the name and surname, it includes such information as: series and number of ID card, PESEL number and registered address.
If you apply for a loan (e.g. cash or revolving) in a bank where you already have a personal account, you will not even be asked to provide an ID card. In this case, all necessary information about you is already in the banking system, and the procedure is carried out entirely online.
Loan amount and currency
Depending on the type of loan, you can raise an amount from several hundred to even several million zlotys. The specific amount of financing is indicated in the loan agreement. There are also mortgage loans denominated in a foreign currency on the Polish market – they are subject to slightly different rules. For example, if you take out a loan for an apartment in euros, then the contract must specify the methods and dates for determining the exchange rate. On its basis, the loan amount and installments paid will be converted. Remember that the currency of the mortgage must be the same as the currency of income.
Purpose of allocating funds
Banks offer loans for any purpose and also to finance specific, well-defined projects (e.g. mortgage, car or investment loan). As for the former, you have complete freedom in how to use the funds, and at the same time you do not even have to inform the bank about your expenses.
In the case of a mortgage, the contract sets out in detail the purpose of financing – in addition to buying real estate, it can also be, for example, renovation or extension. If you do not comply with this point and spend the funds not in accordance with their intended use, the bank will immediately terminate the loan agreement, and thus you will have to return the money immediately.
How funds are available
The content of the credit agreement also includes provisions regulating the issue of payment or making available the funds allocated. If you apply for a mortgage, the money is transferred once or paid out in tranches. A one-time transfer refers to the situation when you buy an apartment (from the primary or secondary market) from the seller who did not use it to secure mortgage repayment. The bank transfers the full amount to the seller’s account after you conclude a purchase / sale agreement for the property and establish an entry in the mortgage on his behalf. With a one-time withdrawal of funds you will also meet with a cash or car loan.
The loan is paid out in tranches, for example, when you finance the construction of a house with an economic system. In this case, the lender will provide you with subsequent parts of the loan as construction work progresses. However, before it makes a withdrawal, it will check whether the funds from the previous tranche have been used as indicated in the loan agreement. For this purpose, he will want to read current photos of the property, construction log and invoices for purchased materials and services rendered. Sometimes the bank sends its representative to carry out home inspections, i.e. more detailed investment controls. If you do not allocate the part of the loan you have received to the next stage of work, the bank will terminate the loan agreement and request a refund.
It is worth mentioning that in some cases the conclusion of a loan agreement does not automatically lead to a transfer of funds. Financial products such as a credit card or revolving limit are available, which do not involve the transfer of money, but the granting of free indebtedness up to a certain amount.
Who will receive money from the loan
For example, if you apply for a cash or revolving loan, the money you borrow will be at your sole and exclusive disposal. In the case of products for a specific purpose, i.e. a housing or consolidation loan, the funds usually do not reach your bank account.
As for the mortgage contract, it may specify, depending on the particular case, that the funds will be transferred:
- the seller of the property, i.e. the seller or developer;
- a creditor, i.e. another bank or bailiff. This is the case when you are buying a mortgaged flat. Your lender will transfer money to repay the loan or other debt secured by the property you are purchasing;
- the investor, i.e. you. If you build a house using the business method, subsequent tranches of the loan will affect your account so that you can gradually carry out the planned work.
Conditions for disbursement of the loan
The loan agreement may also specify the conditions that you must meet for the bank to transfer money from the loan. The longest list of criteria appears for mortgage and investment loans. In the case of a loan for an apartment, you sign the payment order at the bank after completing such formalities as:
presentation of a notarial deed for the purchase of real estate – within the time limit set by the bank or until the loan is disbursed;
presenting a copy of the application for entry of a mortgage in the land and mortgage register in favor of the bank. For the lender, security on the property is a guarantee that in the event of any problems with repayment he will be able to recover the money borrowed;
in the case of a high loan amount: submitting a blank promissory note or declaration of submission to enforcement;
buying property insurance against fire and other random events. Some banks offer a policy offer for a specific insurer, but you can always insure the apartment on your own. If you decide on the latter option, the scope of coverage and sums insured must meet the requirements of the bank; in addition, the policy must include a record regarding the assignment;
documenting own contribution. If you buy an apartment on the primary or secondary market, then the entry with the amount in the notarial deed is also a confirmation of your own funds for the purchase of the apartment. When you build a house yourself, the value of the plot or other elements you make (e.g. foundations) can be considered as own funds;
presentation of a life insurance policy (if required by the bank).
Credit repayment collateral
In the loan agreement, the bank indicates how the repayment of the liability will be secured. In the case of a mortgage, it is most often the establishment of a mortgage on real estate, purchase of a life insurance policy and signing of a blank promissory note. Collateral can also be: a surety of third parties, a mortgage on another property, or an assignment from a deposit or other savings programs.
Similar solutions are used for cash loans amounting to several dozen or more thousand zlotys. By borrowing a lower amount, you can usually avoid making any collateral.
If you want to use a car loan, you must take into account the establishment of a registered pledge or transfer of ownership. In the event of a pledge, the bank will be entered in the vehicle’s registration certificate so that it can sell it if you stop paying installments. The expropriation works so that the lender becomes a car owner and you cannot, for example, sell your car without his consent.
Rights and obligations of parties to a loan agreement
The loan agreement should be structured to regulate all possible issues relevant to the particular case of borrowing money. Therefore, it also contains provisions specifying the rights and obligations of both parties to the contract.
The bank is obliged to:
- transfer or make available to the borrower a set amount of funds for a set period of time;
- provide the borrower with protection in the event of financial problems or threat of bankruptcy – by agreeing to implement a recovery plan;
- keep banking secrecy.
The most important bank rights are:
- requesting collateral for a loan;
- knowing the borrower’s financial and economic condition;
- reducing the loan amount;
termination of the loan agreement – if you break its terms or lose your creditworthiness.
Your rights and obligations as borrowers are obvious: you can use the loan you have received for the intended purpose, and you must pay all related costs on time. However, individual types of credit may provide for other obligations.
For example, a bank granting you a mortgage may require you to:
- reporting any loss or reduction of income;
- providing real estate to bank representatives for inspection purposes – for example if there is a fire or renovation during the loan repayment;
- information on a change of registered address or surname;
- settlement of all credit obligations in the event of the sale of real estate.