There are many situations to think of where it is more or less necessary to borrow money.
If you are lucky, you can do so with a wealthy friend or family member, but unfortunately not everyone is. In that case you will have to knock on a lender. There is of course a distinction between small and large amounts. This way you can easily take out a mini loan for a small amount. For example, if you want to buy a new washing machine or if a little bit of money is short. For larger amounts it is possible to take out a personal loan.
What is a personal loan?
You take out a personal loan when you need a relatively large amount at once for a particular purchase. It is a very clear way of borrowing money. You borrow a fixed amount that is paid into your bank account in its entirety. The term of the loan is fixed as well as the interest. During the term you pay a fixed amount each month as repayment. You know exactly where you stand and external circumstances do not affect the repayment schedule. This is, for example, the case with a revolving credit. In addition, both the term and the interest are flexible.
When to opt for a personal loan?
People often do not know whether they should opt for a personal loan or a revolving credit. Actually the choice is not that difficult. If you have a specific purpose for which you want to borrow the money and you also know exactly the costs in advance, it is wise to opt for a personal loan. An example of this is for example if you want to buy a new car. If, for example, you want to finance a refurbishment and you do not know exactly how much it will cost, it is probably more wise to opt for a revolving credit. The same applies if you would rather be able to withdraw the amounts already repaid.
Characteristics of a personal loan
What makes a personal loan actually a personal loan? There are several properties that are always applicable to this type of loan. Whether these characteristics are an advantage or a disadvantage depends on your own situation. The first characteristic is that with a personal loan you always have clarity beforehand. You know what you borrow, how much interest you pay and how much you have to pay per month. Although you can pay off in the interim, in some cases you pay a penalty interest to the lender. After all, they miss out on income from the interest. A third characteristic is that you can not take back your repaid amounts when you are equally tight. This is possible with, for example, continuous credit.
Duration of a personal loan
The term varies per loan. However, at the beginning of your personal loan it is immediately clear what the term is. You can also choose what you do yourself. Usually the minimum term is two years and you can pay a maximum of ten years on the repayment. In some cases it is even possible to choose a term of fifteen years. The longer the term, the lower the monthly costs. In principle, you pay less per month. However, the total costs are more because you pay interest over a longer period. It depends on your own situation for which duration you can choose the best. In any case, try to pay as much as possible per month so that you pay less interest.
Interest and repayment with a personal loan
On the basis of the amount that you borrow with your personal opinion and the term you choose to redeem, it is determined how much you have to pay back per month. You therefore have no say in that yourself. The amount you pay on a monthly basis is part of the repayment of your loan and for a part of the interest you pay on it. The interest is a fixed percentage that is always calculated on your outstanding debt. If you have repaid half of your loan, you only pay interest on the other half and not on the total amount of your loan. Because your monthly amount remains the same, the redemption part of it is getting bigger and interest is getting less and less.
Terms of a personal loan
Not everyone can just take out a personal loan. There are different standards attached to this. Usually you request a meeting with a lender and try to get an idea of your financial situation in this conversation. Based on this, it is decided whether you can get a personal loan. Among other things, you check whether you have other loans, whether you are registered with the BKR and how much money you will receive per month. It is also possible that you can get a personal loan, but not the amount that you had in mind. In that case you have to settle for less.
Is your decision confirmed and do you want to take out a personal loan? As soon as you search for information on the internet, you will soon discover that there are many different providers. This may make it difficult to choose. Moreover, it depends on your personal situation and preferences which loan is the most advantageous for you. That is why it is advisable to compare the different providers of a personal loan with each other in terms of interest, duration and conditions. You can easily do this online so that you immediately know which loan is best for you.
If you can, transfer your personal loan
The fact that the interest and term are fixed in advance can be beneficial for your loan. However, it is also possible that the interest rate will fall during the term of your loan. In that case you are of course disadvantageous. Sometimes it is therefore more advantageous to switch your loan. You actually take out a new loan to pay off your current one. This is possible in some cases with the same provider or just with someone else. Often you have to pay a fine. In general, however, this fine is not that much and even if you pay it, it’s sometimes even cheaper to switch your loan.