Loan: the four types of loans

Anyone who needs money can borrow it. It sounds simple, but is it? Because there are several types of loans. Which one suits you best depends entirely on your situation, what you want and how much and whether you have any money on hand. A loan is often taken out in case of financial problems. Borrowing with a negative BKR or without a BKR assessment sometimes occurs. There are several types of loans. Take a good look at which type of loan suits you. This can save a lot of trouble. There are roughly four types of loans offered:

Personal loan

With a personal loan, the borrowed amount is paid out in one go, after which it must be repaid with a fixed term and interest. So you know in advance exactly what to expect. You do not receive more than the loan amount and you pay back a fixed amount every month. The personal loan is therefore very suitable if you plan to make a large purchase. This is a good loan for people who are easily tempted to withdraw money again and again. With this loan, a lot does not have to be paid back at once, but it is done in installments, the amount of which is determined in advance. Make sure you inquire carefully about the interest rate, as this can often differ between different providers. It is not strange at all to request information from multiple providers, as a consultation or a no-obligation quote does not oblige you to anything. Never be persuaded, but talk or think about it calmly at home first.

Revolving credit

With a revolving credit you can withdraw the borrowed amount in whole or in part over the term of the loan. Interest is then charged on the outstanding balance of the credit. A revolving credit is intended for people who do not immediately need a lot of money at once, but want to have access to small portions of it. Or for people who are not sure whether a certain amount is enough for them, so that they can always withdraw a little more afterwards. So you can decide for yourself when you withdraw money from the loan and how much. The disadvantage of a revolving credit is that it causes many people to get into too much debt, because it is easy and tempting to withdraw money again and again. You can only withdraw a maximum amount until something has been repaid, after which you can withdraw again. So you can continue to withdraw money for the rest of your life. And that often tempts people and ultimately debts can become high. In the past, many people got into these types of loans and ended up in serious debt. Nowadays, more attention is paid and the information about the consequences of loans has become somewhat clearer. Nevertheless, it is very advisable, with any type of loan, to first inquire carefully about the monthly costs. Especially in the case of a revolving credit, one must ask oneself whether it is wise to want to have access to money at all times, and whether one has the iron will not to withdraw more than is actually necessary.

Interest credit

With an interest credit, you take out a loan that is not repaid, but on which only interest is paid. This is the form of credit with by far the lowest costs, since you do not make any repayments. An interest rate loan has a variable interest rate that moves with the economy during the term of the loan. This means that the interest rate changes continuously. As long as this loan is not repaid, the loan amount remains outstanding. The interest will be paid. The loan can be repaid, for example, with savings or the sale of the home. This loan is mainly intended for people who know in advance that they can pay off the loan amount later and who need money temporarily. There must be something in reserve to be able to repay the loan afterwards. For that reason, one must think very carefully whether this is also feasible. If not, it is better to refrain from this type of loan and look for a personal loan, for example.

Bridging loan

It is not always possible to buy a new house on exactly the same date as the old house was sold. Sometimes an ideal home is found sooner than when the old home has been sold. Financial problems may then arise due to a double mortgage. After all, the mortgage on both homes must be paid. This can therefore entail a lot of burdens. Especially if you want to use the equity from the old house to purchase the new home. You can consider a bridging loan as a bridging loan until the old home has been sold and there are no longer double charges. Make sure you are well informed about a bridging loan, because it often turns out afterwards that it was not necessary. But people are then tied to this credit for a while. Therefore, take a good look at whether it is possible to manage with the double burden for a few months. It is useful to have some savings available before the house is sold or people start looking for a new home.

BKR assessment

The BKR is an organization that keeps track of how much credit a person has or has had in the past five years. This prevents someone from borrowing too much money that cannot be paid off later. If you are registered positively, there is a credit, but the person always pays it on time. A negative registration indicates a late payment or payment arrears. Borrowing money with a negative registration is only possible from companies that want to borrow money without conducting a BKR assessment. These are often companies that charge very high interest rates, but certain stores also participate in this. However, caution is advised: it is easy to borrow too much money in this way, which can cause debts to pile up very high.