When you borrow money, you also make a debt. A debt that can affect your finances several years into the future.
Therefore, it is important that you think well before taking a loan and that you thoroughly examine the loan market. That way, you make sure you get the most sensible loan that you are sure you can pay off.
The purpose of the loan
First of all, it makes sense to think about what you want to use the loan for. This will also have an impact on what kind of loan will be most beneficial to you.
Maybe you just saw a new computer that you would like to own, but you as you do not have the money for right now and here. In that situation, it might be tempting to take a quick, small quick loan and go straight out and buy the computer.
You may also want to buy a house. In that case, it is a much larger loan that has to be paid off for much more years than at the computer. There are different loans for different purposes, therefore it is important to know what purpose the loan has.
Different kinds of loans
There are different kinds of loans that will be more or less appropriate depending on the purpose you have with the loan. Some loans you can get quickly and with few clicks. Other loans require much more preparation and more conversations with a bank advisor.
Loans over many years
Loans that run over many years are often large loans that you take in connection with a car purchase or purchase of a home such as a house or apartment. These loans take a long time to pay back and you should therefore look carefully at where to get the cheapest loan.
There are also loans that are free. Most often it is only possible if you are a new customer and the condition is that the loan must be repaid within a short time frame. For example, you can borrow DKK 4000 free for 30 days, after which expensive interest will be added to the loan.
The quick loans are the loans that you often find on television or on the internet. These are good if you stand and lack something urgent and don’t have money for it. They are called fast loans, because you can quickly apply for the loan and get the money paid out.
Even though quick loans are quick and you can apply with just a few clicks of the mouse, one must still be aware that you do not get the money transferred to the account right away.
Valid from January 1, 2017, a rule was introduced which entails that 48 hours have passed since you have received an online loan application until you get the money transferred to your account.
This is a so-called reflection time, where it is possible as a borrower to cancel the purchase of the loan. The rule was introduced on the basis of a study from 2015, on how many who, after taking a quick loan of DKK 12,000, regretted their loans.
Think about how long your product will last
Something you should consider before taking a loan is how long the thing you want to buy lasts in the future. In this case, you also need to consider how long the loan is on your loan. The maturity determines how long you have to pay off the loan.
Imagine, for example, that you will lend to a new smartphone and withdraw the loan over three years. In that case, make sure that the phone also lasts for the three years. Otherwise, you end up paying off a loan for a phone that you no longer use.
If you even decide to buy another phone and also need a loan for it, you now end up having two loans that you have to pay off. It is not very appropriate and it can quickly lead you into a bad spiral of loans and debts.
Fortunately, if you are unable to make a loan or decide that it is not the right solution for you, there are other options. For example, you can put some money aside each month, thus saving on the things you really want to buy.
Another option is to take an extra job and thereby make extra money that can be saved to just the one you want. The job could be to turn grass or wash windows for the neighbors or be a substitute for a company. That way you can easily earn a little extra.
Anything else you can do is get cleaned up in your cases. There are guaranteed some things at the top of the closet that you don’t use and that others might be able to enjoy. These things you can easily and for free put on sale at The Blue Avis or sell at a flea market.
Talk to your bank advisor
It is always a good idea to talk to your bank advisor regarding loan considerations. Your bank adviser can give you good advice and guidance that you, along with your own knowledge, can use to make the best decision.
It is especially a good idea if you are considering a major loan such as a mortgage loan. Such a loan will have a huge impact on how your financial situation will look many years in the future.
It may be a good idea to prepare well before talking to your bank advisor. Think about what a loan you want and how you want your finances to look. In this way, you ensure that you get the best meeting.
Be aware of this before taking a loan
There are many different numbers and concepts to keep track of when to borrow. It can make it difficult to figure out what the loan actually costs, but if you sit down and invest some time, you can easily find the cheapest loan on the market.
First of all, it is important that you read everything that is in print when looking at loans. Banks and lending institutions must inform you of various conditions that apply to the loans they can offer you.
This includes, among other things, the total repayment amount, which is the total amount you have to pay for the loan. For example, if you borrow DKK 5,000 and the total repayment amount is DKK 7000, you will pay DKK 2000 only in the fees and interest for the loan.
Keep a close eye on…
Once you have decided to take out a loan and you have figured out which loan best suits your purpose and situation, find out where you want to take the loan. Should it be with a bank or an online finance company?
Whether you decide on one or the other, there is one important detail that can help you compare the loans you are investigating. It’s APR, which is a pretty simple concept that can help you compare different loans.
For loans, the APR must be stated to make it easy for everyone to investigate how expensive a loan really is. There is thus a figure that includes all total costs in per cent. year for the loan. It may also be a good idea to look at the total price of the loan.
What does a loan cost?
Now you have looked at the loan’s total repayment amount and the loan’s APR. Then it will be sensible to examine the interest rates of the loan and the monthly amount you have to pay. Then you are completely ready to decide whether the loan is right for you or not.
The interest on the loan is expressed as a percentage. The rule of thumb is that the lower the interest rate, the better. However, this only applies if the other conditions of the loan are also good. If interest rates are low and APRIC high, this suggests that the loan has other expensive costs.
The monthly amount indicates how much you have to pay on the monthly loan. This depends on how long you have decided to pay the loan and how high the APR is. It is important that you have allocated space in your budget for the monthly amount.