What they are and types of loans

A credit agreement is an agreement whereby a credit institution (creditor or lender) makes money available to a bank customer (debtor or borrower), who is obliged to repay that amount over an agreed period, plus interest charges and other costs.

Only credit institutions and certain financial companies registered with Banco de Portugal may grant credit.

Even when a credit intermediary is involved, the credit is always granted by an authorised institution and the credit agreement is entered into with that institution. Some private individuals or companies (for example, automobile stands or appliance stores) may act as credit intermediaries.

The conclusion of a credit agreement is dependent on the will of both parties. Institutions are not required to enter into credit agreements.

Taking out a loan requires careful consideration of the product characteristics. Choosing the right type of loan is important as there are significant differences in conditions and costs.

The main loan categories bank customers resort to are:

Home loans cover credit agreements for the acquisition or construction of permanent or secondary residential property or residential leased property. They also include credit agreements for the acquisition or maintenance of property rights over existing or projected land or buildings and loans for the downpayment due under the future acquisition of property for permanent or secondary residential property or residential leased property.

This is typically a long-term loan, in which, in general, the mortgage of the house is given as a guarantee of repayment.

In addition to home loans, there are other mortgage loans entered into with consumers and which are subject to the rules of home loans. They are:

  • Credit agreements which, not corresponding to home loans, are guaranteed by a mortgage or other equivalent collateral commonly used on real estate, such as consolidated credit or loans in which the purpose of the borrowed amount is not defined;

  • Leasing of property to permanent or secondary residential property or residential leased property.

Consumer credit is used to purchase other types of goods and services, such as cars, household appliances or education and health services, for example.

Consumer credit includes personal credit (for various purposes), car loans (to buy a car), credit cards, overdraft facilities and credit overruns, provided that the credit is not guaranteed by mortgage or other equivalent guarantee on an immovable property.

Loans granted to customers by credit institutions are recorded in the Central Credit Register, a database managed by Banco de Portugal.

Bank customers can access information from the Central Credit Register on the loans for which they are liable. For this purpose, they can consult the respective list of credit liabilities, in the citizen area of Banco de Portugal’s website, provided that the loan is not guaranteed by a mortgage or other equivalent collateral on real estate.

The central credit register map provides information on the type and status of the loan, the amounts outstanding and the term of the loan.