Given the increasing digitization of the economy, currently, going to a bank branch to make a term deposit or ask for a personal loan is increasingly rare. However, even if you decide to go to the financial institution in person, certainly before going, you search the internet for information about what is being sold, or in the case of housing credit, you use simulators available to find the best rate. many, and increasingly, the substitute for the bank account manager or the financial intermediary, in the search for the product that best suits what you want and even in contracting the product.
Buying financial products online
THE contracting financial products online may have increased risks in face of the hiring carried out in person with financial institutions. You must therefore know how to protect and defend yourself.
1. Ensure that the financial institution is authorized to market financial products
Whether you want to make a term deposit or contract a credit, first of all, it is important that you do so in entities authorized by the Bank of Portugal. of Credit Liabilities of the Bank of Portugal, be suspicious. As the Portuguese proverb says “there is no fat chicken for little money”. Therefore, if you do not know the financial entity, consult the Banco de Portugal website to find out if it is an authorized institution. You will be helping others not to be targets of fraud.
2. Identify your financial needs
If your goal is to invest your savings, decide what amount you want to invest, the period for which you want to do it and think about whether you may need to move part of the money (or all of it) before the end of the defined period. This is because what you define will have an influence on the type of application you will have to choose, namely whether it can be mobilized or not. , in its effort rate and consequently in the maximum performance it can support, in the deadline and whether or not it has associated products. For example, if you want to take out a mortgage, keep in mind that you will have to take out multi-risk insurance and life insurance. Also read: Multi-risk Insurance: Coverages you have but may not know
3. Get information about the products you want to buy
Having defined the objectives and always bearing them in mind, the next stage begins to look for solutions that adapt to them. To do this, gather as much information as possible about the products that are being sold. You can do it yourself or use a financial intermediary, whose services are free of charge (because they will be remunerated not by you but by the entity with which you will contract the product).
4. Compare proposals
With several proposals in your possession, you must then compare them. Here are some tips to keep in mind when comparing bids: Bids must be comparable, ie have common assumptions: such as purpose, amount, deadline. If you don’t have them, you can’t compare them. The purpose of the credit conditions the maximum rate to apply, maximum amounts and terms. If it is a personal loan, the rate is set on a quarterly basis by the Bank of Portugal (check here for the third quarter of 2022), on the other hand, for housing loans, the rate is set by the bank and is lower than that of personal loans because it has a longer term and as collateral the mortgage of the property. On credit, look at the APR (Global Effective Annual Charge Rate) and not the TAN (Nominal Annual Rate). The first includes all financial charges associated with credit, unlike the TAN which only considers interest. Many financial institutions advertise that they have the lowest TAN on the market, but almost always at the expense of a higher APR. Still in the case of credit, look at the MTIC (total amount charged to the consumer). While the APR is a percentage value of the credit, the MTIC is the value in euros and therefore easier to read. It includes the loan amount (the principal) plus the total of interest, commissions, expenses, taxes and insurance paid. in the case of term deposits, take into account the interest rate and the penalty for early mobilization.
5. Before hiring, carefully read the product documentation
Before contracting the product, all relevant contractual information must be provided. That is, you will have to be given all pre-contractual information in writing where all your rights, obligations and financial conditions of the product.This information can be delivered in physical format but, in most cases, it is digital. Then, download it to your computer and save for future reference.The information to be made available includes, in addition to the general conditions, the Standardized Information Sheets, standardized, which facilitates the comparison between the offer of financial institutions. In case you are contracting a term deposit or a personal loan, you will be given the Standardized Information Sheet (FIN) contracting products at a distance. However, if it is a housing loan instead of FIN, you will receive the European Standard Information Sheet (FINE), consisting of two parts. Note that in the second part of FINE you will have information on the impact on your installment in the event of a change in the interest rate, and given the current situation of rising interest rates you should analyze carefully.
6. Product Conditions
Carefully review the general conditions and FIN or FINE and make sure you understand all the implications of the product you are purchasing.If in doubt, do not hesitate to ask the financial institution. The latter is obliged to clarify all doubts before hiring you. Don’t forget to see if the general conditions contain your right of free revocation.
7. Product commissions and charges
You must analyze all costs associated with the product. See if you understand why you are being charged all the commissions. If you do not understand the reason for charging any, question and seek clarification. In the case of term deposits, the interest you receive is not that resulting from the application of the interest rate to the amount deposited. IRS tax of 28% is withheld on this amount. In the case of loans, analyze additional costs, namely insurance.
8. Attention to personal data when hiring online
When contracting financial products, you must communicate your personal data to the financial entity. It is also the company’s responsibility to keep them safe under current legislation. Therefore, see in the general conditions of the product the security conditions given to your personal data. See also, when signing the contract, to which entities you are giving authorization to access your data. Assignment to tax and regulatory entities is mandatory by law, but not to other entities. On the other hand, remember that improper access to your personal data may result in identity theft and consequently in fraud committed in the name of. In other words, they can use them to contract other products on their behalf, which could cause them serious inconvenience in the future.
9. Are you hiring online? Keep all documentation
When hiring the product you have to sign the documentation. However, before signing, check if this is identical to the one you were previously provided. After signing, keep all the documentation. If you lose it, don’t worry. The financial institution must make it available whenever requested.
10. If after contracting you regret you can give up the right of free revocation
In fact, under the terms of the law, you can withdraw from contracting the product without having to justify the decision, within 14 days from the date you signed the contract or received it.If it is a credit, when exercising your right of revocation, you will have to pay the institution, within 30 days, the principal and interest accrued from the date of use of the credit until the date of reimbursement of the principal, calculated with based on the nominal rate of the contract and any expenses borne by the institution eg taxes.
After hiring, there are other precautions to be taken
If you feel that your rights are not being respected, you must contact the entity from whom you contracted the service and must complain directly. If you don’t get a response or don’t agree with it, you also have other complaint channels at your disposal. This is how you can complain:Directly at Banco de PortugalOn the European online dispute resolution platform (ODR)On the FIN-NET network to file a claim against a provider in another EU/EEA country As a last resort, you can also file a lawsuit against the financial entity.On the other hand, you must pay attention to your security credentials to prevent others from accessing your private area of the website where you purchased the product.. To do this:Verify that the entity from whom you contracted the product has strong authentication methods.Always log out especially if you are using public computers or in places where others can easily access your computerUse secure Wi-Fi connections, passwords and strong PIN codesKeep your operating system up to date and with antivirus softwareIf you notice or suspect unauthorized access notify the financial institution and the authorities.Also read: Changing banks: Who does what to ensure monthly payments
A professional writer by day, a tech-nerd by night, with a love for all things money.