Finance

All You Need to Know About Forbrukslån (Consumer Loans)

Most people will take a loan in their lifetime, whether to solve a personal or a business need. Also, not everyone has enough cash to purchase a home or a car. Some people require assistance from lenders to make huge investments.

One of the loans you can easily access in Norway and several parts of the world is Forbrukslån, interpreted as a consumer loan. However, you should be armed with the right information to avoid making a mistake. Loans are quite tricky when it comes to managing them, especially if you possess minimal budgeting skills.

What Are Consumer Loans?

Consumer loans are loans that are given to consumers in order to finance certain expenditures. The creditor may or may not request collateral. Each type of consumer loan has a unique purpose, terms, and rates. You may want to visit this website to know the pros and cons of collateral loans.

Secured vs Unsecured Consumer Loans

Secured consumer loans require the backing of an asset that can cover the amount if the borrower does not make payments. Borrowers usually use their vehicles and homes as collateral.

Secured loans have a longer period of repayment, low-interest rate, and a greater loan amount. Since they involve collateral, the lender faces less risk. If the borrower fails to repay the amount, the lender can auction the collateral to cover the outstanding.

Unsecured consumer loans do not require any collateral. They have short repayment periods, a high-interest rate, and a limited loan amount. The features are different from secured loans because the lender’s risks are high. If the borrower defaults, the lender has nothing to lay hold on if they want to recover their funds.

Open-End vs Closed-End Loans

An open-end Forbrukslån can be used for any purpose. However, the borrower must repay a certain amount, including the interest, before the deadline. This type is unsecured and if the consumer can’t make the necessary payment before the deadline, they will be penalized.

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An example of an open-end Forbrukslån is a credit card. The user can purchase anything on credit and then make payments before the due date. But if they fail to do so, they will pay interest on the outstanding until it is cleared.

A closed-end Forbrukslån is used for specific purposes. It is secured, and if the consumer can’t make payments within the stipulated period, the lender might seize their collateral.

Types of Forbrukslån

The common types of consumer loans are as follows:

  • Personal loan
  • Auto loan
  • Mortgage
  • Student loan
  • Line of credit

Personal Loan

This is a common loan type because you can get it from most banks and financial institutions. You can also use it for anything since no specific purpose is attached to it. All you need to apply is a good credit rating.

You can borrow as much as you want and then repay within 1 to 12 months. However, the amount you want to borrow and who you are borrowing from will determine the period of repayment.

If you want quick funds, you should apply for a payday loan. It is short-term and repayment takes place within 2 to 4 weeks. The downside of this type of lending is the high-interest rate.

Another type of personal loan that you can apply for is a vehicle title loan. In this case, the vehicle becomes the collateral. It is a convenient choice for people with a credit rating that is not good enough to access loans. The collateral covers the risk of default.

Auto Loan

Auto loan, as the name implies, comes in handy when you want to purchase a vehicle. The value of the car you intend to buy will determine the terms of the loan. This is because, unlike a home, the value of a vehicle will depreciate with time. It even starts counting the moment you drive out of the dealer’s store.

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As a result, an auto loan has a short rate and the terms are between 24 – 84 months. The lender also needs to ascertain that the vehicle can cover any losses if the borrower defaults. But it is better if you have a down payment to reduce the loan term.

Mortgage

This type of Forbrukslån avails you the opportunity to own a home without having a lot of money. Only a few people can buy a home without taking a mortgage but they may not get their dream home. However, a mortgage allows you to get your desired property as well as pay in installments.

Conventional mortgages call for a down payment of at least 20 percent. It works well for people who have some money already. If you are in the low-income bracket, most financial institutions may be unwilling to lend to you. But some mortgages are designed by the government to help low-income earners purchase a home.

Most mortgages offer fixed rates that you can pay for 30 years. Although there are mortgages of 15 to 20 years, the monthly payment will be high. This may not be feasible for most borrowers.

Student Loan

The cost of education might be too high for some families especially those who have multiple children in college. That is why there are financial aids such as scholarships and student loans. Although student loans are not difficult to access, you should thread with caution.

The loan has a fixed rate while the government pays the interest. There are subsidized loans for students in dire financial need. The student can use the money for any purpose but they should be able to prove that they need it. There are also unsubsidized loans but they accrue interest for the student.

The amount you can get from a government program may not be sufficient to cover your study. This is why private lenders exist. Their interest rates depend on your financial need.

Line of Credit

Credit card users will be familiar with the line of credit. It is used to revolve around debts, which means you can continue borrowing if you do not default. You can get a credit card from your bank or any credit institution. You can also apply online and get instant approval if you are a busy fellow.

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With a credit card, you may be tempted to make more purchases than you can handle. So, before opting for one, ensure you are financially disciplined. Also note that if you do not pay back your loan on time, it may affect your credit rating. Try not to abuse it so that other lenders can rate you as a financially responsible person.

Who Can Apply for Forbrukslån in Norway?

In Norway, you can get Forbrukslån up to the tune of NOK 250,000 without collateral. The repayment period is 5 years, but you can negotiate a shorter term. The interest rate is between 9.9 to 12 percent. The bank will assess your risks to determine how much you are eligible to borrow as well as the rate.

Note that you must be resident in the country and must have lived there for at least 1 tax season. You should also not have any collection remarks known as Betalingsanmerkning. And you should earn a minimum of NOK 220,000 per year. You can visit forbrukslån.no/beste-lån/ to get tips for finding Forbrukslån in Norway.

In Summary

Consumer loans can save you lots of headaches. Even if the situation is an emergency, you can take a payday loan. Forbrukslån is ideal if you are over 21 years, have a steady income, and need extra cash for a short time.

On the other hand, it is not suitable if you

  • Have defaulted on a previous loan
  • Are not sure whether you can pay back the amount
  • Do not know how to handle your finances

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