Are you thinking about taking out a loan? Nowadays you can just do this online, so you don’t have to leave the house. On the other hand, it is important to think carefully about, for example, the type of credit you want to take out. Do you want to use a personal loan or a revolving credit? With the help of a credit, you can save afterwards for a certain purchase. Determine the goal you have in mind and choose the appropriate form of credit based on this.
When taking out a loan, think carefully about the level of the interest rate that you pay, as it also provides a cheap or an expensive loan. Finally, you should consider the term of the credit. The longer a credit runs, the more expensive it will become. On the other hand, too short a term makes the credit unaffordable.
We have listed the important information for credit purposes. Go through the various parts and ensure good preparation, to take out the ideal credit and make a nice purchase or keep some extra money.
Personal loan or revolving credit
When you want to take out a loan, it is first of all important to find out what goal you have in mind. You can use a consumer credit, in the form of a revolving credit or a personal loan. There are variants of this, such as the car loan that closely resembles a personal loan.
The personal loan stands for borrowing a fixed amount, at a fixed interest rate and with a clear term, which is also fixed. The credit offers a great deal of clarity and is quite popular thanks to this fact. You borrow a certain amount, for example $ 10,000. You agree with the bank what interest rate you will pay on this amount, an interest rate that will in most cases be fixed. This ensures that you know where you stand for the coming years, with the personal loan you will certainly not be faced with surprises. In addition, you determine the term that best suits this on the basis of the amount you wish to borrow. You agree with the lender that you will, for example, repay the credit in 10 years. This can be done by means of a linear repayment or another form of repayment. Determine whether you want to repay a fixed part of the loan amount annually, or whether you want to take major steps during the first few years. You can compose the personal loan completely to your personal wishes, which of course already indicates the name of the credit.
You also have the option of taking out a revolving credit. This type of credit works completely differently, for example because the interest rate is often variable. You agree with the bank a maximum amount that you can borrow, the credit limit. There is no need to withdraw this amount right away and you only pay interest on the money you actually withdraw. Do you agree on a credit limit of, for example, $ 10,000 and do you only need $ 1,000 for that? Then you only pay interest on this amount, you do not have to pay anything on the other $ 9,000. Would you also withdraw that amount, for example to cover high costs? Then from that moment you pay interest on the total amount. With the revolving credit, you always have some extra money with you, so you can compare this with ‘overdraft’ in a bank account. The interest rate is usually variable, which means that the monthly charges on a revolving credit can go up or down. You can also re-record any repayments made, so there is less of a clear schedule for repaying the borrowed money.
A bank can tell you more about the differences between the personal loan and the revolving credit. In addition, you can make an online comparison yourself and use a simulation to find the credit that best suits the purpose you have in mind.
Borrow money on installments for various purposes
The moment you use a credit, it is wise to find out what purpose you have in mind. You can save afterwards, as it were, as it is not necessary to collect the (entire) amount for the purchase in advance. For example, do you want to buy a new car, because the old one has broken down, and therefore use car financing? If you don’t have the money for that yet, you can use a credit. This way you ensure that you can immediately receive the key, but on the other hand it is not yet necessary to put the full amount on the table. You use the term to bring the costs for the car together and save, as it were, afterwards. Of course you pay costs for this on the basis of the interest rate that you are charged for the credit.
The difference between the personal loan and the revolving credit becomes clear to many people by thinking carefully about the various goals that you can achieve with it. With a personal loan, you can buy a new car or a kitchen. You know in advance what amount you need for this and you have to pay that in 1x. The personal loan is then the ideal choice, also because of the clear schedule to repay the credit. For example, some credits lend themselves better to quick loans than other types of loans, as is the case with a mini loan, for example.
Are the children going to study and do you wish to have extra money on hand? There is an expensive period at the door, but it is difficult to estimate exactly what you need in advance. You can then use a revolving credit, which allows you to withdraw unlimited money up to the credit limit. Do you seem to need less than you thought? You only pay interest on the amount that you actually withdraw. In this way, revolving credit is a good choice when you need more money over a period of time and it is not yet clear exactly how much this will be in total.
Rate of interest
In any case, if you want to use a credit, it is important to think carefully about the level of the interest rate, by comparing several credit providers. The higher the interest rate will fall, the higher the costs per month. From that perspective it is interesting to look for the lowest possible interest rate. After all, this ensures that you have the opportunity to significantly limit the cost of the credit. Seen in particular over the entire term, a lower interest rate ensures that costs can remain limited.
On the other hand, keep in mind that the very lowest interest rate doesn’t always have to lead to the best credit. In any case, take into account the term of the credit, which we will discuss below. In addition, make sure that the other conditions for borrowing money are in order, for example with a view to possible death during the term. Do additional conditions also apply, or are there administrative costs, for example, to take out the credit? Add this to the interest rate to arrive at the total charges for a particular credit that you wish to use. For example, you will be able to determine to what extent there can be cheap borrowing when making a certain choice for a loan.
Term of the credit
Finally, you should at least take the term of the credit into account to avoid paying high charges in the end. You take out a credit for a specific term, the period that you use to repay the money. If you make repayments in the meantime, the amount of the credit will decrease a little further. As soon as you make the final payment to the bank, you can repay the credit in full and thus the term also ends.
A personal loan always has a fixed term , this does not have to be the case with a revolving credit. In addition, with a personal loan you ensure that you repay more and more of the loan amount towards the end of the term, with a revolving credit you have the option of simply withdrawing the repaid amounts.
It is also not unwise to estimate the term of the loan, because as is known, a term with a shorter duration will cause you to lose more money every month, while this is of course the other way around with a longer term expensive. Provide a good middle ground, so that the monthly costs do not rise too high and the ultimate cost of the credit is reduced as much as possible.