When it comes to borrowing money, it can be incredibly difficult to get an overview, because there are so many different types. The ordinary Dane can have an incredibly difficult time forming an overview because they are not experts in the field and there are many legal and technical glosses that can confuse.
All the many different loans have its advantages and disadvantages, which you should pay close attention to when you are in a situation where you have to take out a loan. Below are a number of different loan types that you can take a closer look at and form an overview.
When you take out a regular bank loan, you should be aware that the interest rate varies somewhat depending on which bank you are a customer in. However, the interest rates at a bank are typically somewhat higher than at e.g. a mortgage lender. Because the interest rates vary from bank to bank, you are also open to negotiate and maybe get a lower interest rate. It depends on your financial situation, age, how long you have been a bank customer and the like.
However, it may also be an idea to contact other banks when you need to take out a large loan, because maybe you can get a better deal in house with a competing bank. This can give you favorable terms and something to negotiate with when you need to talk about loans with your bank. Just keep in mind that bank loans are more expensive than mortgages, so it’s typically a good idea to pay back the bank loan first.
When it comes to mortgages, you have more options. You can consider whether you want a fixed-rate loan, which means you pay a fixed interest over a number of years. This may be e.g. 15, 20 or 30 years. Most people choose a period of 30 years, but this varies from situation to situation. For example, if take out a small loan, then it might be an idea to pay it off in 20 or maybe even 15 years. The faster you are debt free, the better. It may seem like an advantage to have a fixed interest rate for so many years, but it is not without risks. For example, if the interest rate. increases, then the bonds that pay off one’s loan may fall in price. Conversely, interest rates may rise so that one can redeem at rate 100, which helps one to avoid any loss.
So a fixed-rate loan relies on a reasonably stable interest rate, to be a perfectly safe solution. But if it rises, you can risk reducing your outstanding debt. With a variable interest rate, this is not possible and it is important to consider this when choosing your loan type. However, the initial interest rate on variable interest rates is somewhat lower than on fixed-rate loans, so this can be an advantage. It is up to the individual to assess what is best.
This may almost sound too good to be true. A loan without repayment, but it has also attracted a lot of Danes to take out these loans. A mortgage-free loan can be taken on both mortgages and bank loans, which means that you have a period of up to 10 years when you simply do not have to pay off the loan. Surely there can be no downside to that?
But the truth is, unfortunately, different, for many Danes forget that the loan must be repaid one day and therefore they have no plan when the 10 years have passed. From the first day, you should make sure you have a plan that can help one to create an overview and be able to pay off when the grace period has expired. The performance each term is quite high on a mortgage-free loan, so it often comes down to those who have taken such a loan. It is very important that you have an economy that can handle this increased term, otherwise you may be caught in an unfortunate situation where you cannot pay off your debt.
However, mortgage-free loans are not without its benefits. Of course, it gives a lot of air in the economy that you do not have to pay off your loan for many years. After all, the space and air in the economy can be conveniently spent on something practical, so that you do not have your hair in the mailbox when the loan is to be repaid. The only thing you have to pay in the interest-free period is the interest rate, which is quite modest.
A mortgage-free loan can be a really good solution in various situations, but just have to make sure from day one how to repay it when the interest-free period has expired.
There is a type of loan that many people will not touch with a tong. The mortgage loan has gained an unbelievably bad reputation, due to irresponsible Danes taking out loans that they cannot afford. A repayment loan is a type of loan that is taken out by banks and mortgage lenders. You can borrow regardless of your financial situation and even if you are registered in RKI, although this is not recommended.
A repayment loan does not require any security or explanation as to what the loan will be used for, so it gives a lot of freedom to the borrower. However, it does not come at no cost, as the interest rate on a quick loan is among the highest at all. This is because the loan is intended to be repaid promptly. The typical repayment loan does not run for more than a month, otherwise the costs are simply too high.
It can be a good read if you are in urgent need of money and need money fast, otherwise you should consider other options – borrow more about this loan here.
Always borrow with care
If you are in a situation where you are considering taking out a loan, it may be a good idea to compare the APR on the different loans. ÅOP stands for Annual Cost Percentage and is the expenses you have per year on the loan. This is something that can have a big impact on the decision-making process.
Whatever loan you take, it is important that it fits your finances so that you do not end up in an unfortunate situation. There are too many Danes who end up in financial ruin because they have had disarray in the economy. Make sure it doesn’t happen to you.