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Everything You Need To Know about Forbrukslån
Are you planning to renovate your home? When was the last time you had a proper vacation? If finances impede you from accomplishing your plans, you can take an unsecured consumer loan to cover the expenses for home renovation, vacation, unforeseen medical bills, etc.
The application process for such loans in Norway is straightforward and effective. Applicants must be at least 18 years old and have a fixed income. Since there is no collateral, borrowers should pay higher interest rates. Here is everything you need to know about billig unsecured consumer loans.
What are they?
As the name implies, Unsecured consumer loans require no security for the borrowed sum, referred to as collateral. In contrast, secured ones need some sort of collateral, depending on the type. For instance, if taking out a mortgage, applicants must provide the property they have purchased as collateral. The same conditions apply for credits taken out to buy a car, cabin, or boat.
If not repaying your debt, the bank has the right to take over the assets applicants have pledged. With unsecured consumer loans, there are no such requirements or any restrictions regarding the purpose for borrowing such a sum. Since the risk of lending money without collateral is higher for banks, the calculated interest rate is also higher to cover potential losses.
There are numerous benefits of taking an unsecured consumer loan. The borrowed sum can be used for whatever you want, provided it’s within Norwegian law. The most frequent reasons are home renovation, travel, vacations, unforeseen expenses, refinancing of credit card debt, etc. These are cheaper than microloans and credit cards.
Moreover, the effective interest rates of consumer loans are lower than those of credit cards and microloans. The typical effective interest rate of the former ranges between five and ten percent, whereas the average interest rate of the latter exceeds twenty percent.
Click here to learn why credit card interest rates are near all-time highs and how to deal with high-interest debt. As previously mentioned, they require no collateral or equity, meaning they are available to most people with fixed income.
Another benefit is the efficiency of the application process because of the little documentation required in comparison with traditional loans. Additionally, BankID has also played its part in making the process faster. Usually, applications are processed automatically, with the answer arriving within a couple of minutes. Payment is made when loan documents are signed, which takes one to two working days.
Another reason individuals prefer unsecured consumer loans is the possibility of using them to refinance the debt from microloans and credit cards. You will be provided with better terms and won’t have to deal with more than one bank. The repayment period is flexible, which is a maximum of five years. Nevertheless, if the purpose of borrowing the money is for refinancing, the repayment period can be increased to fifteen years.
Everything You Need To Know about Forbrukslån: How to apply for one?
The application process is straightforward and much less time-consuming compared to mortgages and other secured loans. You should apply for multiple loans simultaneously to obtain the best offer. Once you have submitted several applications, you will be provided with offers from the banks you have applied to. You are recommended to choose the product with the lowest effective interest rate.
After making a decision, you should sign an agreement with BankID on the bank’s website. Following the process of signing the agreement, the money will be paid out to your account within a short period. In order to find the cheapest consumer loan in Norway, applicants are advised to only look at practical interest rates when comparing offers.
The effective interest rate is more realistic than the nominal one, as the former reflects the actual costs by including all fees and expenses in the calculation. Considering the non-binding character of unsecured loans, you can apply for one with several banks simultaneously. It increases the chances of being granted and getting a competitive offer.
Applicants are also suggested to consider hiring a loan broker, as these professionals are capable of picking up rates from as many as twenty-three banks at the same time. Such brokers save time and help borrowers achieve low-interest rates.
Moreover, the minimum requirements of Norwegian banks are for applicants to be over the age of eighteen, be Norwegian citizens, have a fixed income, and have their taxes paid for at least three years. A credit assessment is always made on potential borrowers, including their income, current debt, and payment history.
Norwegian banks check applicants’ credit scores, which affect one’s eligibility and the chance of getting low-interest rates. If your score is high enough, you will likely be offered a relatively good interest rate and have your application approved. Individuals whose credit score is low may still be offered a consumer loan.
Nevertheless, the interest rate will probably be too high. Instead of agreeing to pay such a high rate, why not improve your score and apply for more favorable terms. The quickest way to improve your score is by paying off the outstanding debt on your credit card bills and avoiding payment remarks. The following link, https://www.cnbc.com/select/how-to-boost-your-credit-score-fast/, reveals four ways to boost your credit score fast.
Another thing to consider when applying for a consumer loan is the niches and specializations of banks. Some banks focus on microloans, while others work with clients who apply for loans of higher value. Other banks specialize in working with customers with payment remarks or refinancing consumer debt.
Refinancing loans are classified as separate since they are explicitly designed to refinance existing debt. Hence, they have a specific purpose and offer slightly better conditions.
How are interest rates determined?
The majority of banks rely on the same criteria when deciding whether to offer an applicant a consumer loan and what interest rate to offer. Lenders consider four factors during the assessment, including income, repayment ability, willingness to repay, and risk. The first factor inspected by banks is the income of applicants.
Furthermore, the income has to be fixed, and borrowers must earn a minimum of 120,000 kroner annually. Individuals can apply for unsecured consumer loans without having income from employment. There is a list of exceptions practiced by most banks. For instance, people receiving a disability benefit can submit an application, as this benefit is considered fixed income.
Students are also likely to get a consumer loan if they show proof of fixed income from working a weekend job. Self-employed individuals are usually considered eligible, but they need to provide proof of income for the last three years in the form of tax returns, business statements, or bank accounts.
Borrowers with low incomes are likelier to get approval by having a co-borrower. In such cases, the finances of both the borrower and co-borrower are assessed. It’s worth remembering that both parties share the same responsibilities for repaying the loan.
The following factor assessed by banks is the repayment ability of applicants. It refers to the amount you are able to pay on loan every month. It’s determined by calculating the fixed expenses of borrowers and seeing how much is left.
Even people with solid income might get their application rejected if their debt is high or their fixed expenses are too large. The bank is supposed to consider you as a suitable candidate able to afford to pay on loan.
The willingness to repay is another assessment factor used by banks to rate applicants. The credit history of borrowers has a tremendous effect on the rating. Individuals who pay their bills on time and have no significant debt are in an excellent position to get approved. In contrast, those who continuously overdraw their salary accounts and have multiple debts are likely to be denied.
Ultimately, the interest rate depends on the risk that banks must take to consider an applicant eligible. In the absence of collateral, lenders have to protect themselves by increasing the interest rate.
Everything You Need To Know about Forbrukslån: The Bottom Line
Check your credit score before applying. If it’s low, you should improve it to have better chances of approval!