Today there are a large number of loan options that you can use if you want a little more money on the account. But it is far from all people who have control over what is what in the loan industry. Therefore, here comes a review of the most commonly used terms that you will encounter when you have to borrow and their significance for you as a borrower.
When you take out a loan, this means that you enter into an agreement with a person or company that you receive some money against repaying them over an agreed period. There are generally two types of loans, consumer and bank loans.
Is the classic loan where you agree a meeting with the bank. The typical bank loan – which can, for example, be used for the purchase of housing or investment in a company, is characterized by:
- Long maturity
- Low interest rates
- Requires security
- Bigger amounts
Long approval process
A consumer loan is a particular type of loan, which is mainly aimed at people who want access to money quickly and without having to provide security. Consumption loans are most often used for the purchase of consumer goods, it can be the purchase of a trip, a new television or something completely third. Consumer loans are characterized by:
- Short approval process
- Short term
- High interest rate
- Does not require security
- Smaller amounts (as low as DKK 500)
ÅOP accounts for annual costs in percent and describes how much you as a borrower will pay in costs per year. That is, the term covers both the interest you have to repay, but also all the fees associated with the loan, such as administration fees and formation fees.
If you take out a loan, the APR must always be indicated. This is done to give the borrower an idea of how much to repay each year. On consumer loans, the APR is almost always higher, unless it is a free loan.
The interest on a loan is an expression of the percentage of the amount you have to repay, in addition to the amount borrowed. Interest rates vary widely from loan to loan. On most loans, the interest rate will be the same throughout, this is also called a fixed interest rate.
If a loan with a variable interest rate is taken up, there will be a chance that the interest rate will change during the loan period. It can be both a good thing and a bad thing. The vast majority of consumer loans make use of a fixed interest rate, where the variable interest rate is typically used for long-term loans.
If a combination is interest and repayment, which gives you how much you have to pay in kroner each month during the repayment period. The benefit of a loan is important, as you can more easily get an overview of how much you have to pay exactly. When you take out a loan, you can see in the contract how much the monthly benefit is on. This makes it easier to compare the individual loans.
The maturity is an expression of how long the loan extends – how long does the loan run. In addition, there is also typically a correlation between maturity and interest rates – as loans with shorter maturities usually have higher interest rates than loans with long maturities.
For most loans, you will have the opportunity to influence the maturity. If you want to repay your loan faster, you can usually contact the loan company and agree. If you set your maturity down, your monthly benefit will go up accordingly.
If you want further information about the individual factors, ask when you take out a loan, what the individual things in your contract mean. Most companies will be happy to explain to you what the individual things in the contract mean to you.