Credits from banks are often used to finance large purchases such as a car or real estate. But we also quickly opt for a loan for smaller expenses. Anyone who wants to borrow money from the bank can choose from many types of loans. But how do you choose the right financing?
What credits are there?
Anyone looking for loans from banks can choose from numerous forms of financing. Some commonly used credits include:
- personal loan;
- revolving credit
- credit card.
But not every bank customer who submits a credit application at his branch automatically receives the desired amount. Only those who can demonstrate in a personal credit interview that they are financially able to repay the borrowed money will receive a positive decision. But what creditworthiness do you need?
With a personal loan, purchases can be financed according to a fixed repayment schedule. For larger expenses, whether it concerns a new TV, renovation or a new car, savings are usually insufficient or are tied up for a longer period of time. It is then not recommended to permanently overstate the current account balance. It is better to take a personal loan .
Personal loan in short:
- Almost every bank offers a personal loan, albeit often under its own name. Microcredit, private credit, direct credit, to name just a few variants;
- The interest on a personal loan is usually much lower than on an overdraft;
- Personal loans are generally made available to bank customers in one amount;
- The loan amount must be repaid in equal monthly installments throughout the entire term.
- The interest component included in the installments is calculated at a fixed interest rate for the entire term;
- In addition to interest, you often owe a one-off amount in closing costs, ranging from 2 to 4% of the loan amount.
Before applying for credit, the borrower must in any case determine exactly what monthly payment scope is available based on regular income and expenses. Sufficient space must be left for special wishes such as a short holiday, or for unexpected expenses, such as a major car repair. The term of a loan should preferably be kept as short as possible. After all, over a longer period, financial problems may arise sooner, because unforeseen changes such as having children, illness or unemployment may occur.
A mortgage is a loan secured by real estate. The money can be used for many purposes: purchase, new construction, renovation or renovation of a house or apartment. The repayment of another, more expensive loan from a mortgage is also possible.
Mortgage in brief
- The advantage of the mortgage is the long term. It allows for a low monthly payment.
- In addition, mortgage customers with a long fixed interest rate period create planning certainty for the future;
- The customer’s financial situation and personal circumstances decide the individual terms and conditions;
- Anyone who can contribute some money improves their creditworthiness. 20% of the total financing is ideal;
- The bank also assesses the condition and value of the property used to cover the mortgage loan.
More and more people are interested in leasing. While this alternative financing was initially something specifically for companies, private consumers can now also lease cars, furniture, computers and much more. With leasing , the customer only receives a right of use for a certain period. For example, he can drive a car for 36 months if the lease agreement has been determined for this duration. Lease in short :
- Low monthly payments, but compared to regular credit, leasing is a more expensive alternative;
- Lease terms only apply to rent. You do not become the owner of the car or the furniture;
- Only after the lease agreement has expired can you purchase the goods for the residual value (not mandatory);
- Repairs and operation of the rented object are the responsibility of the user.
Leasing is especially fiscally rewarding for entrepreneurs. Moreover, these cars, computers and machines use so much for the company that they need to be replaced much more often than private individuals.
Applying for a credit card is a must for travelers
Even when we apply for a credit card, it is actually a form of credit. Since the credit card company usually only pays for our purchases after a month, the customer is therefore granted a deferral of payment and thus in effect also a loan.
Credit card in short:
- If you often travel outside the holiday season and are over 18, a credit card is the preferred means of payment.
- The most used credit cards in the Netherlands are MasterCard and Visa, followed by American Express and Diners;
- Rates for cash withdrawals by credit card at ATMs or bank counters are determined separately by institutions;
- Credit card withdrawals at the ATM are generally more expensive than withdrawals with a regular bank card;
- According to an EU regulation, euro payments within the monetary union may not be charged a higher price than for a comparable transaction in the home country;
- When using the credit card outside the euro zone and when using the card within the euro zone for a currency other than the euro, an additional fee usually applies.
Interest and redemption
Everyone who receives a loan must repay the loan amount within the agreed term: they repay the loan. Repayment is usually made in monthly installments. In addition to the monthly repayment, i.e. the repayment of the borrowed sum, interest payments are also due monthly. Interest is, as it were, the price of the borrowed money. The interest rate is based, among other things, on the current interest level, the type of credit, the term and the creditworthiness of the borrower. Creditworthy means that the bank assesses the extent to which the customer as a borrower is considered capable of repaying the money. The better this assessment is, the cheaper it can be borrowed. If you want to repay the loan early, the bank may charge an early repayment penalty.