What is the sensible way to take a loan?
What you need to know about taking out loan
To begin with, it is important to realize that taking out loan always costs money. Bodies that advance money do not live off the wind, but from the interest and, for example, service costs that are charged when closing and paying off a loan. For every euro you borrow you will therefore have to pay a little more than a euro.
Which loan suits you?
When you take out a loan , you have to avoid having to take out a loan in which you pay too much. Actually, that is very simple. Think carefully about what you want to borrow money for. Is it a fixed amount, something you will spend on a one-off basis, such as a car or a refurbishment? In such cases you are always advised to take out a personal loan.
A personal loan
With a personal loan you borrow a fixed amount in one go at a predetermined interest rate and a predetermined term. For example, if you borrowed 20,000 euros for the purchase of a kitchen. A lender can deposit this amount into your account in one go, so that you are given the opportunity to purchase the kitchen you want. You then pay a fixed monthly amount with a pre-agreed interest rate. With a personal loan you know exactly where you stand.
It is possible that you need money at several moments and can not estimate exactly how much and when. After all, you can not predict the future. Think, for example, of following a study. In such a case you can opt for the conclusion of a revolving credit. This is a construction where you can withdraw money up to a certain amount. You then only pay interest on the amount you have withdrawn and amounts that you have repaid you can withdraw later.
The advantage of a current credit
The big advantage of a revolving credit is that you always have a buffer at hand while the loan is in progress. The disadvantage is of course that you can never estimate in advance how long the loan will run. The interest rate with a revolving credit is also variable. It can drop, but also rise. The final costs for a revolving credit can not be estimated precisely in advance.
The right question leads to the correct answer
Despite the risks that both a personal loan and a revolving credit entail, both constructions allow you to afford things without having to save for years. The question that you have to ask is what you need the money for. If it is a one-off expense, you opt for a personal loan. Do you regularly need money, then a continuous credit is something for you.