The loans for the purchase of consumer electronics items, such as mobile phones, smartphones, cameras and PCs, are a form of consumer credit belonging to the category of targeted loans .
These loans are associated with the purchase of electronic goods, therefore they are activated directly by the sellers by virtue of exclusive conditions stipulated with banks and financial institutions.
In other words, the financing in this case is tied to the purchase of a specific consumer electronics item, it is paid by the financial directly to the seller and repaid in installments by the buyer.
In essence, the financial company distributes the agreed sum to the retailer, to settle the good sold, while the customer sees himself delaying the purchase price with the payment of monthly repayment installments.
Being forms of financing often designed to stimulate sales, they are easily accessible at advantageous conditions and interest rates. Precisely the simplicity with which electronic and PC loans are obtained, together with the reduced monthly installments, often leads to a risk of over-indebtedness of applicants.
To obtain an electronic loan, specific requirements are not required, as well as to prove that they have a certain income and a good credit standing.
Often, in order to limit the risk of insolvency, credit institutions require the signature of a co-obligor or a third guarantor as guarantee , guaranteeing the success of the transaction. This is a rather common request under special conditions (such as an applicant with a recent seniority or a particularly high amount).
However, it is not possible to establish rules that are valid a priori as the eventual request for guarantees � at the discretion of the individual Institute which decides on a case-by-case basis, depending on the risk profile of the transaction and the individual applicant.
THE ELEMENTS OF THE CONTRACT
The law establishes that a loan contract for electronics and PC must contain the following elements:
- the interest rate charged;
- any other price and conditions applied, including the higher charges in the event of default;
- the amount and method of financing;
- the number, amounts and expiry of the individual installments;
- the annual percentage rate of charge (APR);
- the detail of the analytical conditions according to which the APR can possibly be modified;
- the amount and purpose of the charges that are excluded from the APR calculation;
- any guarantees required;
- any insurance coverage required and not included in the APR calculation.
NON-PAYMENT OF AN INSTALLMENT
The interruption of the repayment of the loan entails the immediate non-fulfillment of the financing institution and the risk of unpleasant consequences:
- the interest due would be increased, with the application of a default;
- there is a risk that your name will be included in the list of latecomers and / or reported to credit protection bodies (the Central Risks), which will share information with the entire banking and financial system. The result will be the worsening of the customer’s creditworthiness and a consequent greater difficulty in obtaining credit in the future.
Failure to timely pay even a single installment authorizes the lending institution to unilaterally terminate the contract. The customer will be required to pay all bank and protest charges as well as all the expenses incurred by the Institute to recover the sums due, in addition to a possible penalty.
Furthermore, it is important to remember that the purchase contract for the electronic product and the loan contract are totally separate: the purchase contract concerns the consumer and the seller, while the loan agreement is aimed between the consumer and the financial institution.
This means, for example, that if the electronic product is defective, it is not possible to retaliate with the dealer by interrupting the repayment of the loan. This action would not have an impact on the retailer, which received the purchase price of the asset directly from the financial, but would lead to a negative report to the databases of the credit information systems.
The law guarantees the consumer the possibility of early repayment of the loan . If the consumer decides to choose this option, in addition to the repayment of the residual capital, he could pay a penalty that must not exceed, by law, 1% of the financed capital; the exact terms of the penalty are reported in the signed contractual conditions.
Below we illustrate in a schematic way some specific evaluation criteria of the liquidity loan.
- Risk policies : each Institute applies its own risk policy in the assessment of requests, based on the statistical data it has (credit scoring). This data is the tool that allows the Institute to keep insolvencies below a certain level.
- Income level : the acceptance of the requests is normally also subordinated to the evaluation of the income level of the applicant and to the relationship between the latter and the possible repayment installment.
- Credit reliability : finally, the creditworthiness of the applicant is of great importance. It is important to emphasize that this evaluation has no “moral” meaning. The Institutes are limited to estimating the level of risk connected to each request, also on the basis of the indications transmitted by the Central Risks. If the credit history of the applicant presents some “flaws” (delays in repayments of previous loans, unpaid debts, etc.) the probability that the request will be accepted is obviously lower. In some of these cases a valid alternative is constituted by the Assignment of the fifth: this solution, offering the appropriate guarantees to the financing Institute, allows the adoption of more flexible evaluation criteria.
When choosing between multiple financing offers, it is good to consider the overall cost of each loan , not limited to the assessment of the monthly installment only. However, this is not a simple operation since the items of expenditure of a loan can be numerous (amount disbursed, interest, ancillary charges, possible initial expenses, insurance costs) and are not easily measurable in an immediate manner.
In general, the elements that should be considered before signing a loan agreement are:
- TAN (Nominal Annual Rate) : represents the interest rate, expressed as a percentage and on an annual basis, applied to the financed capital (sometimes gross of any insurance costs or preliminary investigation costs). It is used to calculate, starting from the amount financed and the duration of the loan, the portion of interest that will be paid to the financing institution and which, added to the capital share, will determine the repayment installment.
In our section dedicated to calculation tools , you can calculate the amount of the monthly installment and the total expenditure for interest, indicating the main characteristics of the financing that you intend to request.
- TAEG (Global Effective Annual Rate) : � a measure, expressed in percentage terms, with two decimal places and on an annual basis, of the total cost of the loan. Unlike the TAN, the APR is inclusive of any additional charges such as investigation costs and insurance costs, which are charged to the customer.
However, under certain conditions, Italian legislation allows a certain discretion, excluding or including some items in the calculation of the APR: insurance costs, for example, if optional, can be excluded from the calculation. Pay attention and carefully consider your overall expenditure, analyzing each time the items of the offer you are offered.
In our section dedicated to calculation tools , you can calculate the loan APR and compare loans with different characteristics, and easily determine the financing from the most advantageous economic conditions.