Loans in Spain: What You Need to Know

Whether you need a loan for a major purchase, or are just looking for a short-term fix, it makes sense to crunch the numbers first. We take you through what you need to bear in mind before taking on credit in Spain.

Take a look at your credit rating

It may work differently to the system in your home country, so take a look at what details the Bank of Spain has on file about your finances before asking for a loan.

Remember that advertised loan rates are not offered to everyone. Once a study has been made of your circumstances by a bank you may be offered a rate that’s considerably higher.

We’ve rounded up everything you need to know in our dedicated post: How to check your credit rating in Spain.

Understand what the numbers mean

When comparing different interest rates, double check if the headline figure is the TAE or the TIN rate. 

The TIN is the nominal interest rate, but the one you should be looking for is the TAE – the equivalent annual rate. The TAE includes all applicable charges which means the interest rate of course but could also include admin fees, commission or any other costs.

You also need to ask how any charges would be paid. Sometimes they will have to be paid upfront, or they may be included in the regular monthly repayments and there are even some cases where the amount is deducted from the capital you request.

Check if you need to take out an additional financial product

A great TAE rate may come with a catch: you need to take out insurance or some other product that the bank sells. Some banks may only be willing to give you a loan if you agree to open an account with them and deposit your wages there every month.

When you have to take on other products the loan may not work out to be the best, or the cheapest.

Calculate how much you’ll repay in total

One of the easiest ways to know how much you’ll really have to pay for a loan is to calculate the total cost over the lifetime of the loan. In this total remember to add any charges as well as the regular repayments.

Always read the contract

It’s a good idea to know what would happen if you missed a repayment. Also find out if there are any charges if you decided to pay off your loan early.

If you don’t understand the terms of the contract, make a list of all your questions and ask for an appointment either in a branch or over the phone.

Other things to look out for

0% loans

Many big stores in Spain run promos throughout the year when the TAE rate really is 0%, in other words you’ll get interest-free finance. These promos are often run through their partner finance firms, once they have your info they can target you with more offers in the future.

For big ticket items an interest-free loan can be a good option to buy something you need.

Push notifications from your bank

Your bank knows all about you: your monthly income and your outgoings. With this info many banks offer clients a prearranged loan; with a single click you could receive the amount in your account. As well as email notifications you could also receive push notifications on your phone.

Just because your friendly bank says you can have a loan without having to fill in any paperwork, it doesn’t necessarily mean you’re being offered the best rate of interest so shop around before clicking!

Buy now, pay later (BNPL)

Many online stores in Spain now offer the chance to finance your purchases, but the way that BNPL works differs from store to store. Generally you can choose from different options, for example repay in 3, 6, 9 or 12 months, and the monthly amount normally includes all charges. However, take the time to read carefully all the details to ensure you’re not signing up for expensive credit.

More information

Take a look at our older article that ranks different types of loans available in Spain from the good ones to those to avoid.