When you want to take out a personal loan (or a mortgage) through a bank, a series of linked products, also called links, is often included. These are services offered by the bank when contracting a personal loan or a mortgage. Most banks offer a lower interest rate when proposing their loan offer, however, in order to qualify, the bank will require you to hire the related products that appear in the contract. Payroll, insurance, cards, etc. There are several types of linked products and, therefore, you must ensure that you have all the necessary information when requesting bank financing.
Types of linked products
Probably the most frequent link is direct debit. Most banking entities require you to hire this product when you sign your mortgage loan. However, it usually does not entail an extra charge.
Another of the most used links is direct debit. It consists of domiciling your electricity, gas or water bills with the bank. As much as direct debit, usually does not involve an extra cost.
Related products also include credit or debit cards. When hiring your mortgage, many banks will require you to create a credit or debit card. Although hiring is generally free, many times it does require a minimum annual expense.
The linked products often serve as a guarantee to the bank in case you cannot continue paying your monthly payments. Therefore, some banks require the contracting of various types of insurance:
Life insurance serves to ensure the collection of the loan in case of death of the borrower. Its cost depends largely on factors such as the age, profession and health status of the insured.
As in the previous case, for the protection of the payment of the mortgage fee in case of not being able to face unemployment or temporary disability, there are unemployment insurance or payment protection insurance. You have to check the conditions and price of these products well, as well as keep in mind that they only cover a limited number of monthly payments.
According to Royal Decree 716/2009, of April 24, which says that “the assets on which the mortgage guarantee is constituted must have insurance against damages appropriate to the nature of the same”, the law only requires the contracting of Home insurance when opening a mortgage. However, it is increasingly common to hire more complex home insurance (fire, flood, theft, etc.)
Thus, the rest of the linkages required by banks are not mandatory and banks often require them in exchange for a lower interest rate. That is, these linked products not only serve to obtain credit, but can also reduce the interest rate applied. So, sometimes, they could be profitable. To assess the convenience, it is very important to know well about the cost and payment methods.
Credit and loans without ties
Without needing financing for a larger project, but you don’t like banking conditions and their related products, another alternative is to go to a private equity financial institution. These companies grant personal loans under better conditions to banks on a large number of occasions, without incurring commissions or mandatory related products.