Loans are in their simplest form an agreement between a lender and a borrower about the loan terms. The lender has the funds available and borrows them under specific criteria, often through an interest rate of some sort and some additional fees. This is considered the payment for borrowing the money and is paid back monthly, quarterly, biannually, or annually by the one who borrowed the money. As the agreement is made, certain aspects like amount, runtime (how long the period for returning the money is), and interest rate must be set. This is often done by banks to consumers, where banks have the funds available to them and lend them to their customers under a specific contract.

An example of a loan like this could be an amount of 10,000 RON, over a runtime of 8 years (96 months), with an interest rate of 7%. With fees included, the final repayment for this loan is around 14,000 RON. However, this amount is split over 96 terms (months), with a monthly payment of 1373 RON (fees included).

Usually, you would need to consult a local bank to sign up for a loan, but as online banking has become more and more popular, there are several lenders offering convenient online loans. While most traditional banks require a thorough investigation of your financial standpoint regarding monthly income, budgets, last year’s spending and much more, online lenders only require minimum information, which makes them more accessible. Some online lenders might also offer lower interest rates, since they are not burdened by paying rent for a physical subsidiary in the area.

To apply for a loan, you must fulfill the following requirements:

• Be over 18 years old. Some banks might have a minimum age requirement of 21 or even 25. This requirement often comes with larger loans, so there are still plenty of loans available to you even if you are only 18.
• Have your place of residence in Romania. Some financial institutions, in connection with bigger loans, might also require Romanian citizenship.
• Have a stable income source. Banks offer the loans on the basis of getting back the money after the runtime has passed. If you don’t have a secure income, you cannot pay back your loan with the added interest, which in turn means you will not be able to take a loan in the first place.

Here is an overview of loans offered by online lenders in Romania, which you can also find right here on Moneezy:

Classic loans

Consumer Loan (Credit de nevoi personale), Quick Loans (Credit rapid), and Payday loans (Credit până la salariu) are the three different loans that follow the classic loan structure in Romania. You apply for a loan of a certain amount, decide on a runtime for paying it back, and repay the loan with the added interest and fees.

These loans can be used for a lot of different things. The smaller loans can be used for an unexpected expense that has come through, an emergency that must be taken care of, or invested in an item you've wanted for years. The bigger consumer loans are more suited towards initiating start-ups, loans for property or vehicles, as well as energy optimization or renovations in your home. The possibilities are endless, which is why the consumer loan is the most popular loan.

Special loans

Consolidation Loans (Credit de refinanțare) is a term for combining several smaller loans into a bigger loan, to avoid paying huge interest for several loans at a time. These are especially useful when consumers have taken several small loans and are now burdened with several payment dates and different interest rates.

Lastly, we have Overdraft (Linie de credit), which allows you to exceed the amount of money on your account by a set amount each month, without paying the normal fees. This is especially useful when conducting a project, for example a house renovation, where unexpected expenses can come out of nowhere. The loan only becomes active if your account experiences overdraft, and the loan will cover the rest of your expenses. Once next month’s paycheck comes in, the loan is automatically paid off with a small interest rate.

Pros of Online Loans

• Quick capital to suit your situation
• Allow you to realize your projects
• Transparency throughout the entire process
• No loan justification
• Convenient and flexible

Cons of Online Loans

• Lifestyle inflation, where you spend more money because you have more money
• Debt, if you are not careful with your budget
• Reckless spending
• Extra fees if you do not comply with payment dates

If you are not realistic and thorough in your planning of budgets in connection with your loans, you can end up having trouble paying them back. Furthermore, if you apply for a loan to spend on devaluating assets such as technology, fashion, and trends, you are not looking at investments, but rather at impulsive spending, something to avoid using loans for. Being mindful and intentional about your loans is the most important aspect. If you keep these risks in mind when applying for a loan, loans can be a great source to realize projects.