Reflexive and irresponsible borrowing is a simple way to falling into serious financial trouble. Conscious planning and spending of cash is a feature of reasonable people and the basic principles of the so-called responsible lending policies.
In defense of consumers
The so-called “responsible lending and borrowing”, in other words “responsible lending”, is an initiative of the European Commission whose idea is the rational regulation of the consumer loans market . It is no secret that the activities of many companies in the non-banking sector arouse much controversy and often violate all laws governing the financial market. Consumers suffer the most in their case, burdened with very high costs of loans taken out. These are no longer loan services, but mere usury. In order to counteract such practices and protect the potential client against making bad loan decisions, the principles of good borrowing practices have been developed, which allow to consciously incur and grant financial liabilities.
Solid information more valuable than gold
In order for lending companies to be ethical and lawful, lenders must first and foremost provide their clients with transparent and detailed knowledge about the terms and conditions for their consumer loans . This mainly concerns the amount of the financial liability, the duration of the contract, as well as all costs associated with such a service. In addition, the consumer should have unlimited contact with the loan company at any time in the event of any doubts or questions related to the service offered.
Transparent advertising message
The rules of responsible lending also provide for the use of explicit and understandable advertising messages that will not mislead the potential customer. They must contain information on the total loan amount, the actual annual interest rate (APRC) as well as the amount of installments and interest. The customer must also be informed about the possibility of withdrawing from the contract within 14 days and about the rules for submitting complaints about the service.
Responsible borrowing also means appropriate feedback. A potential client of a loan company should receive a detailed explanation about the rejection of his loan application , e.g. whether he is listed in any of the debtors’ registers or whether, according to estimates, his financial situation is not sufficient to cover the liabilities due to the contracted liability. However, we should remember that the responsibility for the loans taken does not lie solely with the lender but also with the person who decides to use this type of financial service.