Artificial Intelligence vs. Microinvest Expert: Answers to the Most Common Loan Questions

Since the advent of artificial intelligence, obtaining quick answers to frequently asked questions has become a fast and easy way to discover everything you’re interested in. Popular questions among clients include: What are loans? How to calculate a loan cost? How to manage your budget? What to do when you are refused for a loan? What if you can’t pay? At Microinvest, as part of the international Global Money Week campaign, we strive each year to provide useful and relevant information about money and loans. This year, we aim to do it in a totally new way.

Together with our colleague Ivan Pulucciu, the Head of Business Underwriting Unit, who participate to all loan decisions, we decided to test the recommendations from the most popular chat platform in 2023 and complement them with useful tips from Microinvest for making responsible and profitable loan decisions.

What factors should we consider before taking out a loan?

Chat GPT: Loans are sums of money borrowed for a specific period, typically with interest. Before taking out a loan, it is crucial to carefully analyze our financial situation and repayment capacity. Important aspects to consider include the purpose of the loan, our income and expenses, the interest rate, repayment terms, and credit history.

Ivan, Microinvest: Moving beyond the basic definition, I would describe a loan was a tool that enables you to acquire something valuable for yourself and your family, helping you achieve a goal on time. From the decision to take out a loan to making the desired purchase, several stages must be navigated. This process includes a detailed analysis of the repayment terms and assessing how they fit within your budget. The purpose of the loan is equally important. Purchasing low-quality items that quickly break down or making unnecessary investments can lead to regret. Therefore, it is crucial to approach these decisions with utmost responsibility, considering both the benefits of the investment and the potential risks involved.

Why would a loan be declined?

Chat GPT: There are several reasons why a loan application may be refused, including negative credit history, insufficient income, existing debts, the purpose of the loan, lack of collateral, and incomplete or inaccurate information.

Ivan, Microinvest: Refusal in lending is an unpleasant moment, firstly because your application is not accepted, and secondly because you will not be able to carry out your plan. However, a refusal can sometimes protect you from potential problems, such as penalties and over-indebtedness. Reasons for a loan denial include over-indebtedness, negative credit history, or a risky lending purpose. Sometimes alternative solutions are proposed; for example, if a large loan is refused, a smaller amount might be offered. At Microinvest, we maintain open communication with our clients about these issues. We explain how loan costs are calculated and why a particular loan may not fit their budget. Some clients have even thanked us for preventing them from making an inappropriate purchase. Others, initially refused, have returned later and successfully obtained the financial support they needed.

How to differentiate real and calculated payment possibilities?

Chat GPT: The real possibility of payment refers to the amount that a person can actually afford to repay without compromising essential needs in their budget. This figure may differ from the calculated payment possibility, which is typically an estimate based on averages and may not account for individual anticipated needs or unexpected expenses.

Ivan, Microinvest: When you really want something – be it a car, phone, piece of equipment, or even a house – you might hotly analyze your ability to pay and rush into taking a loan to fulfill your dream as soon as possible. However, in such situations, the risk of default is high due to a potentially unrealistic assessment of your financial capabilities. Here’s an important recommendation: it’s often safer to opt for a longer-term loan that allows for early repayment rather than a short-term loan with high monthly payments that you might struggle to meet. To calculate your actual payment capability, start with your fixed or average monthly income, subtract your personal expenses, and set aside some savings for emergencies. The remaining amount represents your real capacity to pay. Keep in mind that while there is a calculation formula for this, it may not always align with your actual situation since everyone’s expenses vary. This principle applies equally to business investments, which are critical for growth. Thorough calculation and analysis are essential to efficiently achieve your business goals on time. As mentioned, a beneficial loan is one that solves problems rather than creating new ones.

Tips for budgeting when you have a loan

Chat GPT: Budget planning is a crucial process that aids in managing expenses and saving for long-term financial goals. The main steps include: calculating your income, identifying all expenses, prioritizing these expenses, setting a monthly budget, and regularly adapting this budget based on actual expense monitoring.

Ivan, Microinvest: There is no one-size-fits-all formula for budget planning as it varies from person to person. It’s crucial to keep in mind some straightforward recommendations that can help you tailor a planner to your needs. A key strategy is to begin with basic expenses and then address additional costs; doing the reverse can lead to risky financial situations and discomfort. Encouraging savings is also important. Decide how much you can save each month and, for added motivation, calculate how much you will have saved after a year. It’s rewarding to know that in 12 months, you’ll have a specific amount of money that could be used for vacations or as a down payment on a significant purchase like a car or house. Most importantly, financial education should begin in childhood to foster responsible adults. Engage children in conversations about money and loans in simple terms they can understand, but ensure to answer all their questions. Learning to manage finances from a young age makes it much easier to plan income and expenses responsibly.

How does Microinvest get involved in the financial education of society?

Chat GPT: Microinvest, as a non-bank lending organization, actively contributes to financial education through various projects aimed at helping clients understand financial concepts and manage their finances effectively. Through these initiatives, Microinvest plays a crucial role in enhancing financial literacy within the community.

Ivan, Microinvest: I am pleasantly surprised and grateful that our involvement in financial education campaigns has been noticed and appreciated. Microinvest employs a unique approach to financial education. In every client interaction, whether through discussions, visits, or consultations, we are eager to provide answers to any questions. Unfortunately, there are still many who do not manage their budget effectively; they spend their entire salary as soon as they receive it and later struggle with how to cover their monthly needs, leading to over-indebtedness. Conversely, some people become more financially responsible when they take out a loan, knowing they need to repay it on time, which teaches them to manage their finances better. As a financial institution, we strive to provide essential information to everyone, fostering strong relationships with our customers. This approach has led more than 46,000 of our customers to share their positive and responsible lending experiences with friends and family, thereby enriching the entire community. Additionally, our company actively participates in international financial education campaigns like Global Money Week, which helps instill financial literacy from an early age.

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Client's Name
Client's Surname
Personal Identity Number
Currency
Term
Rate
Amount
Monthly payment
Amount to receive
Purpose
Comments

1. Name and Contact Information of the Creditor
Creditor
Address
Phone number
Email Address
Web page

3. Costs of the credit
Rates related to the credit
Annual Percentage Rate of Charge (APR) This is the total cost expressed as an annual percentage of the total amount of credit. The APR is there to help you compare different offers	%
In order to obtain the loan in accordance with the agreed terms and conditions, it is mandatory to conclude an insurance contract to guarantee the loan or a contract for another ancillary service.
Related costs
Any other costs deriving from the credit agreement	Fee for services rendered in relation to usage of credit, calculated and paid as follows: of the credit and paid by the Debtor on the date of granting the credit from own sources or is deducted by the Creditor from the amount of the credit The negotiation / prolongation of the credit can take place by mutual agreement of the parties, by signing an additional agreement, the Creditor being entitled to request an increase in the interest rate within the limits provided by the legislation in force. In case of negotiation / prolongation of the loan, the Borrower shall pay to the Creditor, at the date of the negotiation / prolongation a commission in the amount of 2% from the credit balance at the time of negotiation / prolongation.
Conditions under which the costs related to the credit agreement can be changed	The Sides can change the costs related to the credit by written agreement signed by both parties; For the non-constitution of the guarantees within the agreed term, the Creditor is entitled to calculate, and the Client will pay to the Creditor an Interest of delay in the amount of 5% annually, applied to of the daily balance for each day of delay, starting with the date following the term established for the constitution of the guarantee/ s and until the date of the proper execution of the respective obligation.
Obligation to pay for notarial fees / mortgage registration fees / fees for noting the prohibition of pledge in the Transport Register related to the pledge of means of transport (agricultural machinery)	Paid by the Client , except as otherwise provided in the pledge / mortgage agreement.
The cost for the valuation of real estate proposed in pledge	Paid by the Client directly to the Evaluator
Costs in the case of late payments Missing payments could have severe consequences for you (e.g. forced sale) and make obtaining credit more difficult
The repayment of the loan is free of charge in the secondary offices of the Creditor, as well as at the discretion of the Debtor through the representatives authorized to collect loan payments. The list of which and their fees are published on the website of the Creditor (www.microinvest.md/cum-achiti-creditul/). In case the Debtor use payment methods with fee, the Debtor cover all the costs of repayment of the loan and undertake to make the payments in such a way that the Creditor receives the agreed repayment amount and without any deductions by third parties processing the refund payment.
In accordance with and arising from the provisions of art. 15, para. 7), lit. a) from Law no. 202/2013, any payments related to the granted credit (commissions, taxes, penalties, late interest and any other type of payment), except interest, will be applied and collected within the limit of the ceiling of 0.04% of the total value of the credit per credit day multiplied by the number of days of actual use of the credit (hereinafter 'Ceiling'). Therefore, the Lender will be entitled to apply and collect the costs, excluding interest, exactly in the fixed or percentage amount established in the contract if the said ceiling allows, and if the ceiling is lower than the value of at least one cost, excluding interest, then the Lender will be entitled to reduce the fixed/percentage amount and apply and collect any of the applicable costs only within the limit of the ceiling value. When calculating the ceiling, the costs already applied and collected will be taken into account, with the exception of interest, which reduces its value. (Representative example: if the amount of the penalty is 20 MDL per day, and the ceiling value at that time is 16 MDL, then a maximum of 16 MDL will be collected).

4. Other important legal aspects
Right of withdrawal You have the right to withdraw from the credit agreement within a period of 14 calendar days	Yes
Early repayment You have the right to repay the credit early at any time in full or partially	Yes
The creditor is entitled to compensation in the case of early repayment The Debtor may repay the loan in full or in part in advance, notifying the Creditor in writing 3 days in advance, and paying an early repayment fee of:	% from early repaid amount, if the period of time between the date of early repayment and convened maturity exceeds one year; % from early repaid amount.The early repayment can be made only if the Debtor has no outstanding debts on interest or other amounts to be paid in accordance with the Contract. % from early repaid amount, if the period of time between the date of early repayment and convened maturity does not exceed one year.
Database usage The creditor must inform you immediately and without charge of the result of a consultation of a database, if a credit application is rejected on the basis of such a consultation. This does not apply if the provision of such information is prohibited by law or is contrary to objectives of public policy or public security The parties may agree on additional terms and conditions, which will be included in the credit agreement.	Yes
Right to a draft credit agreement You have the right, upon request, to obtain a copy of the draft credit agreement free of charge. This provision does not apply if the creditor, at the time of the request, is unwilling to proceed to the conclusion of the credit agreement with you	Yes
The period of time during which the creditor is bound by the pre-contractual obligations	This offer is valid for 15 calendar days after it is issued.
In this regard, I subsequently declare that: I was provided with the necessary information, the essential characteristics of the above-mentioned credit product were explained (interest rate, number of commissions, credit costs, early repayment conditions, total amount to be paid), as well as the consequences of non-compliance with contractual clauses; the costs included in the total cost of the loan were explained to me, including the costs for ancillary services related to the credit agreement; I was offered the possibility to negotiate individually the contractual clauses in the credit agreement that I intend to sign, I negotiated individually the granting commission, the monthly commission, the amount of penalties and I mention that its clauses do not disadvantage me, being fair in the report mine with the creditor; I was asked by the creditor about the probable importance of the information provided and whether essential circumstances that I expected to be provided were not omitted in order to make an informed and rational decision about concluding the potential credit agreement. the information provided and the corresponding explanations allowed me to assess, including the personal analysis of other offers of third party creditors, whether the proposed credit agreement is tailored to my needs and financial situation; I know the content of the contract and all its conditions have been explained to me, I have understood and accepted them, and the documents and information underlying the conclusion of the contract are complete and accurate; I know the law, the normative acts that will govern the contract, as well as the lack of consumer quality; I have no ambiguities or misunderstandings regarding the terms of the contract; the credit product corresponds to the purpose described above and will be used according to the destination and the economic activity carried out. The assets procured/resulted/constructed/repaired from received loan sources will be registered/transmitted in the social capital of the company where my business activity is carried out and/or will be used jointly by the members or individually however strictly for running my business activity. (Signature)