General-purpose loans

General-purpose loans enable the use of funds in accordance with consumers' (users of loans) needs and wishes.

Types of general-purpose loans

Credit line (permitted overdraft facility on a current account)
Due to its easy access, this is the most frequently used type of general-purpose loans. The amount of credit line as a rule depends on the amount of regular monthly income of current account owners.

Cash loans
This type of loans is granted for the purpose of bridging liquidity gaps, with the cash being advanced to the account of the user of loan who is then free to use it as he/she wishes, i.e. in accordance with his/her needs and to whatever purpose.

Lombard loans
This type of loans is granted on the basis of a lien on real movable property (deposit, insurance policy, units in investment funds, housing savings, securities, etc.) serving as security for the loan. The amount of loan is typically lower the market value of the lien, and the advantage of such loans is that the user of the loan maintains the ownership of the lien (except in the case where the loan is not repaid under the agreed terms and conditions).

Mortgage loans
Cash loans with real estate as collateral

Specific-purpose loans

Specific-purpose loans are loans where funds are granted for a specific intended purpose only. They generally carry a slightly lower interest rate compared to general-purpose loans.

Types of specific-purpose loans

Consumer loans
This type of loans is usually granted on the basis of a proforma invoice for the purchase of some goods or on the basis of an offer issued by the seller. Such loans are granted for various purposes such as, for instance, purchase of furniture, household appliances, technical apparatus, car appliances, construction material, etc.

Loans for motor vehicle purchase
This type of loans is granted on the basis of a proforma invoice for the purchase of vehicle issued by the seller or on the basis of an agreement on the transfer of ownership rights on the vehicle that is the subject of the loan.

Student/pupil loans
They are granted for the payment of the studying expenses in the country and abroad and may be used to pay for private secondary education school fees.

Housing loans
They are granted for the purchase, construction or remodelling of homes. If the loan amount granted is not paid in full directly to the account of the seller or the contractor, the use of the balance should be documented.

Things to be taken into consideration prior to a decision on negotiating a loan

Before a decision on negotiating a loan, it is necessary to analyse all the potential costs so that the total final cost does not come as an unpleasant surprise and result in inability to settle the agreed obligations. The simplest way to making your first analysis is to look at the effective interest rate (EIR) which shows the total cost of a loan in a uniform manner and facilitates comparison between different credit institutions' lending terms and conditions. However, bear in mind that the EIR does not include costs which are not directly associated with the terms and conditions of a credit institution, such as notary public fees, fees for certificates, permits or decisions of competent bodies nor any possible default interest expenses which may be incurred in the future as a result of defaulting on payment obligations.

In addition to the actual price of a loan, before concluding an agreement, a credit institution is obligated to present to the consumer, without charge, all other important contractual terms and conditions and, should it agree to enter into a loan agreement with the customer, upon customer's request, a draft agreement. Also, before concluding an agreement, the consumer should have access to the general operating conditions regulating credit operations and/or ordinances regulating interest calculation, calculation methodology and changes in fees and/or a copy of a tariff of service fees and charges, detailing:

• the applicable nominal annual rates of regular and default interest;
• the method of interest calculation;
• the terms and conditions applying to changes in regular and default interest rates over the life of the loan;
• the currency of the principal or the currency to which the principal is tied and explanation of the risk of changes in the exchange rates of these currencies;
• fees and commissions charged and the possibility of their change;
• the effective interest rate which reflects the total price of a loan;
• repayment plan – the amount of principal and interest repayments, dates due, the number of instalments and their amount;
• the terms and conditions for making a deposit with the credit institution, if this is a prerequisite for the granting of a loan;
• the possibilities and the terms and conditions for offsetting loans by deposits (if applicable);
• instruments of collateral and other terms and conditions, stressing out the consequences of defaulting on obligations;
• the right of the consumer to withdraw from an agreement within the legally prescribed time limits; and
• the terms and conditions that apply to early loan repayment.

If there are other participants in a credit relationship appearing in an agreement, the credit institution is also obligated to present to them all the important information on the terms and conditions that apply to the agreement and inform them about their rights and obligations.

BE INFORMED: Before negotiating a loan, credit institutions are obligated to provide you with the European Standardised Information Sheet (ESIS). The Croatian National Bank has prescribed the obligation to issue this form to all credit institutions, thus, personalised information in the form can help you compare the types of loans with different credit institutions.

If you wish to negotiate a loan in a foreign currency, in addition to the desired loan, the credit institution has the obligation to provide you with a form with a comparable loan in the domestic currency. Where loans on offer by the bank do not include a comparable loan in domestic currency, the credit institution has the obligation to provide the Information Sheet of the Croatian National Bank with the current offer of loans of all banks in the domestic currency. Such a regulatory framework has created preconditions for the adoption of a well-informed financial decision.

The same procedure is also prescribed if you show interest in a loan with the variable interest rate. In this case, in addition to the form for the desired loan, the credit institution should also provide you with a form containing data on a comparable loan with a fixed interest rate. However, where loans on offer by the bank do not provide for the possibility of concluding a loan with a fixed interest rate, the bank has the obligation to provide you with the Information Sheet of the Croatian National Bank, which shows the current offer of loans of all banks, including the offer of loans with the fixed interest rate.

In addition to the direct contact with the bank, the consumer can find the Information list on the website of the Croatian National Bank or using the free of charge mHNB mobile application.

IMPORTANT: When making a decision on negotiating any specific product and service in a credit institution, including decisions on negotiating loans, one should bear in mind that entering into a contractual relationship implies the assumption of certain obligations. Failure to fulfil these obligations carries with it also certain financial sanctions in the form of default interest and/or additional costs, prompting debt generation and measures for the collection of unpaid obligations by the credit institution. To minimise the risk of surprise, embarrassment and disappointments, one should:

• think twice about the necessity of the loan or some other contemplated form of borrowing;
• determine own financial possibilities (currently as well as over the life of the contractual relationship);
• inquire about lending terms and conditions for the same or similar type of loan with several credit institutions;
• examine all the available information about lending terms and conditions and possibilities;
• ask for additional clarification, where necessary;
• ask for advice or help, where necessary; and
• think hard again before taking a final decision.

USEFUL INFORMATION: You may change your mind about the signed loan agreement within 14 days from the date of signature.