• Have evaluated various offers

Before borrowing, it is important to compare the different types of credit first. When you do this, see a number of service providers' offers. Assess the credit terms that you are offering: interest rate, commission and other contract terms.

• Have read and fully understood the credit agreement

Carefully sampling the entire contract. If you do not understand any of the above points of the contract, you should find out what it will mean to you after the contract has been concluded. Ask questions and, if necessary, ask the professional for help.

• You know how much you will have to give in and within what deadline

Always make sure you have to give it up. The amount of the amount to be repaid shall be determined by the amount of the money borrowed, the interest rate and the maturity of the return, as well as the repayment schedule. If you have chosen a longer-term credit, you can be so eligible for it interest rate consisting of a fixed and variable part (EURIBOR). Try mortgage credit calculator.

• Have thought about minimizing risks

Our ability to repay credit is influenced by a variety of factors, such as our health, our work capabilities, etc. In order to be sure that we will be able to repay the credit in different situations, we can insure the credit and the risks associated with its repayment.

Types of loans and miscellaneous offers

Before borrowing, it is important to compare the different types of credit first. When this is done, meet a number of service providers' offers to choose the best and most appropriate. In order to compare tenders, account shall be taken of:

• Annual percentage rate (APR). An APR should be compared when choosing a suitable loan. This indicator includes all credit-related costs, represented in percentage terms. Learn more about how to calculate an APR here.
• Terms of the contract. It is essential to draw attention to the conditions for early repayment, extension or deferral of the loan and possible commissions in case of changes in the contract. Keep an eye on whether a monthly fee is charged for servicing your credit account.
• Credibility and cooperation. It should be noted that there are other important aspects that will determine how satisfied you will be with your choice during the entire repayment of the credit. It is necessary to feel secure about the services provided by the lender, to make sure that they are easy to use, and that you can agree to make changes to the repayment arrangements if necessary.

The right to carry out a comprehensive comparison of credit supply before you have entered into a credit obligation is also enshrined in regulatory frameworks. The credit provider must provide you with information (European Standardised Information Sheet, Mortgage Credit or European Consumer Credit Standard Information form in the case of consumer credit). The purpose of this form is to provide information that makes it possible to compare different offers and to make an informed decision on the conclusion of a credit contract.

Credit is a service to be paid for. The fee shall include regular interest payments and commissions that constitute the income of the credit institution and allow it to cover its operating costs.

The interest rate depends to a large extent on the cost of the credit institution to raise funds and the risk that the borrower will not be able to return the credit at the scheduled time. The higher the risk, the higher the interest rate. When granting a long-term credit, the credit agreement shall normally set an interest rate consisting of a variable and constant rate.

• The fixed interest rate is determined individually for each customer. It shall be fixed in the credit contract for a longer period or even the entire term of the contract. The variable base rate consists of a variable interbank interest rate (EURIBOR). This rate shall be reviewed every 1, 3, 6 or 12 months, depending on the time limit laid down in the credit agreement.
• The floating base rate fluctuates according to the market situation, resulting in an increase or decrease in the amount of the monthly credit payment. Increasing EURIBOR will also increase monthly payments. Find out what it is now Euribor rate. Try mortgage Credit Calculator. Learn more here.

Other credit costs

In the process of drawing up credit, there are other expenses that should be taken into account. They may be different to different types of credit, and additional costs will also vary depending on which loan is taken for. The total costs to be taken into account are:

• credit-related expenditure, which includes all payments intended for the lender (loan interest, loan fee, settlement fee or credit account maintenance fee, if any, fee for the means of settlement, etc.);
• all payments for ancillary services that are required to be entered into in connection with the credit. For example, in the case of mortgage credit, real estate valuation fees, real estate insurance charges, mortgage reinforcement fee, State fee for mortgage registration, etc.;
• payments that are independent of whether the transaction takes place from its own coffers or through credit. For example, in the case of the purchase of a dwelling, the State fee for the registration of property rights, the clerical fee for the strengthening of new rights, the costs of a sworn notary, etc.

Creditworthiness is the ability to assume and fulfil the obligations of the credit agreement concluded (to make payments), in accordance with the terms and time limits of the contract. It is a professional assessment of how much credit or credits can be available for you to survive and repay them without delay over a certain period of time.

As a general rule, household spending on servicing all loans should not exceed 30% - 40% of total income. However, it should be noted that each borrower has his or her own habits, so it is important for the borrower to also recognise and assess the impact on the household budget of credit payments.

Regulatory frameworks include guidelines aimed at clarifying the basic principles for good practice in evaluating consumer solvency - Consumer capacity to repay credit for credit assessments for credit providers providing lending services to consumers (renewed).

Purpose of borrowing

When I see if I can afford it, I have to see if I need to afford it? The purpose of the loan, must be rational, not emotional. The purchased case must have added value. For example, your computer can improve the efficiency of your work, help you learn a foreign language, and add value in other ways. The purchase of a car should also be weighted by calculating not only the possibility of purchasing the vehicle itself but also by maintaining it, which includes additional costs for insurance, road tax and potential repairs and other costs. The same applies to housing – one is its acquisition and the other – maintenance costs in the long term.

In order not to become a burden due to unforeseeable credit obligations (illness, injury, loss of work), this risk may be reduced by insurance services. There are several types of insurance available which will reduce these risks:

• Credit payment insurance. The offers of service providers vary, but this type of insurance reduces the risk that, in the event of incapacity or unemployment, the credit is no longer eligible for reimbursement;
• Life-term assurance;
• Accrual life insurance;
• Non-residential property insurance (in the case of mortgage credit, this is a mandatory requirement).

Your credit history allows your credit institution to assess whether you have fulfilled your financial obligations in a timely manner so far or whether you have delayed payments. It contains information on both existing and past credit obligations. Good credit history will enable you to obtain more favourable credit terms, but it should be noted that credit conditions also depend on other factors. You can learn more about your credit history Credit Information Office.

Credit register. For a large part of the credit institutions (including all Latvian banks), information on all your liabilities is available in the Credit Register maintained by the Bank of Latvia, and they have the right to become acquainted with it once you have turned to a possible credit institution with an intention to obtain the credit. Find out what information about you is includedIn a credit register.

Statement on the income of a natural person (credit taker) the following may be requested for free:

• by electronically sending an application to (“Documents” - “From Forms” - “Information to the State Revenue Service”);
• by sending an  e-address or to vid@vid.gov.lv a submission electronically signed with  a secure electronic signature and certified with a time stamp;
• submitting an application in paper form at any SRS customer service location;
• by mail.

Without the participation of SRS employees, the person may itself prepare a statement by selecting an appropriate type of statement in the “Statements” section of the SRS Electronic Declaration System (EDS). Each EDS certified statement contains a code, a QR code and an active link by which any EDS user can verify the authenticity of the statement.

The application shall indicate to the natural person:

• the given name, surname, personal identity number and declared address of the place of residence;
• phone or e-mail address;
• what information is required, such as a statement of income generated in 2022;
• why a statement is needed, for example, for obtaining a credit;
• to which the statement is to be addressed (not necessarily the full name of the recipient, such as the bank (credit institution), and not the A/S “XXX bank”;
• the preferred type of receipt of the information (in place of customer service, electronically to the specified e-mail address, or in the SRS Electronic Declaration System).

The SRS reviews the request within 1 working day and prepares a statement. It shall be issued in accordance with the type of receipt of the statement indicated in the application.

! We are informed that the SRS is also entitled to refuse to issue a statement to a person, if the submission does not specify full information (for example, no identifying personal data, period regarding which information is required, etc.).

The Bank of Latvia (the BL)

The Financial and Capital Market Commission (the FCMC)

The State Revenue Service (the SRS)

Work, Taxes and Salary Tax Book

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