Responsible lending must be made easier according to the AFMOn January 26, 2020 by admin
The Netherlands Authority for the Financial Markets (AFM) and Freo discovered in a recent study that the way in which the website of credit providers is set up influences the final loan choices.
According to the AFM, 1 in 5 households runs the risk of taking out a loan that does not fit their (financial) situation, interests, and needs. The way in which input screens guide consumers through the closing process influences this.
For example, according to the survey, people opt for a repayment amount that is 8.5% higher if the input screen does not show a monthly repayment amount of ‘2% of the loan’.
Surprising results also came to light with regard to the choice of the term: anyone who can decide on the term of the loan chooses a longer period (on average 7 months longer).
The result is a lower repayment amount per month and therefore less risky for the consumer. The more information and concrete examples customers receive during the completion process, the more responsible the loan eventually becomes.
However, the research shows that not all current input screens are set up in the interest of the customer. The AFM, therefore, calls on credit providers to make careful decisions in their online choice environment and to always put the customer’s interests first.
In this article, we explain the risks of borrowing money and how consumers can make responsible choices when taking out a loan.
Risks of borrowing money: what can you look out for?
Everyone knows that borrowing money costs money. Moreover, not all consumers are aware of the risks of taking out credit. These are the most important things to take into account:
- What is the total amount (loan amount plus interest) and is the loan target worth this?
- Are you able to meet the mandatory monthly repayments for years?
- What happens to the loan if you die? Can you afford a possible life insurance policy with your loan?
- What happens to the loan in the event of a divorce?
- Can you continue to repay the loan monthly in the event of unemployment, if you start working less or if you are unable to work?
How GFIC supports responsible choices
Our vision is that everyone has the right to borrow money but in a responsible way. On our website we also support making well-considered choices through the secure My GFIC environment:
- In the application form, you can see the differences between a Personal Loan and a Continuous Credit so that you can properly determine the correct product form.
- You get a picture of how many months you spend on the repayment, the interest and whether it is variable or fixed.
- The monthly amount and the total price are clearly displayed so that you can clearly see that a slightly higher monthly burden results in a shorter duration. If you pay off a little more each month (a few tens of euros), it may save you 1,000 euros or more over the entire term.
- In the application form, we already ask whether you want to refinance existing current loans. Having multiple loans side by side is really risky, unclear and expensive.
- You will immediately see an overview of 5 banks with the interest, the monthly period, duration, the total amount (loan amount plus interest) and the conditions.
- The monthly costs including and excluding a term life insurance are shown.
- We encourage extra repayment: at GFIC, customers can always pay extra without penalty, so that they are debt-free faster.
Want to know more about our method? Or request a free quote?
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