Irrespective of how you feel about loans, they are important components of a nation’s economy. Not everyone has the financial capacity to meet all their needs, so they require a level of support. However, most loans are geared towards business support and require collateral.
Because not every financial need is business-related, forbrukslån (a Norwegian word for consumer loans) comes in handy. Unlike commercial lending, consumer loans meet personal and family needs, including emergencies. But before you decide to låne-penger (borrow money) for personal reasons, you should know how it works.
How Does Forbrukslån Work?
You can get a consumer loan from a bank, an online lender, or a credit union. After choosing your preferred financial institution, fill out the application form, then wait for approval or rejection. The lender assesses your credit score to determine whether you qualify or not.
Additionally, lenders consider your credit history. If you have a reputation for borrowing money and being reluctant to pay it back, you may not get approval. This classifies you as a high-risk customer. But if your score is high and you have a good history, you qualify and will receive the money either as a direct bank deposit or a check.
Forbrukslån does not require you to present collateral, which makes it unsecure. This means if you default, the lender can’t forcefully collect your personal belonging. But they can employ other means of recovering the debt.
Reasons to Get a Consumer Loan
A consumer loan covers the following aspects:
- Personal loans
- Car loans
- Student loans
- Credit card loans
You can use it for almost anything but within the provisions of the loan term. Below are some reasons to get forbrukslån.
Pay Off Outstanding Debt
Sometimes, credit card users are unable to repay their lenders. Most of what they owe is from purchases, including accrued interests and fees for late payments. This also applies to people who take out multiple loans.
You can pay off outstanding debts with a consumer loan, especially if you get one with a low-interest rate. It makes things easier as you will have one monthly payment to make and won’t lose track of deadlines. Also, if your credit score was hanging on a balance, you can attain a good score by paying off your new debt on time.
Home Upgrades and Repairs
Homeowners who want to undertake home remodeling projects can opt for home equity. However, this financing option is a secure one and requires using the home as collateral. This implies that if you do not meet the deadline for repayment, you may lose your home to the lender.
But if you intend to correct issues that might impact the safety and health of you and your family members, a personal loan would be appropriate. Home issues that require immediate attention include:
- Leaking gas
- Clogged pipes
- Broken heater or air conditioner
Unlike secure loans, personal loans do not require you to present your home as collateral. They are also faster to get than home equity.
Purchasing Essential Appliances
Forbrukslån is helpful when purchasing electronics and household appliances that you use daily. For instance, if you have a growing family, certain appliances such as a washer and dryer become necessary. This will save you the cost of always visiting the laundromat.
Although this option attracts an upfront fee and interest, you will save money and time in the long run. You will be able to cut down on expensive alternatives as well as get the appliances you need immediately.
Building an emergency fund is necessary but when you are not prepared, forbrukslån can suffice. It covers emergencies such as:
- Medical bills
- Unplanned auto repairs
- Funeral expenses
- Paying overdue home utilities
- Job loss
- Helping a family member or friend
Surprise medical costs are one of the major reasons for taking a consumer loan, especially if the physician requests full payment before treatment. The application process is online, and you can quickly see whether the amount was approved or not. Also, funds may arrive the same day or after 3 business days.
Payday Loan Alternative
A payday loan is short-term lending that comes with a high-interest rate. The borrowed amount is paid back on the next payday, which is within 4 weeks. You will get funding immediately but the risks outweigh the advantages.
Because of the short repayment period, borrowers may be unable to make payments by the deadline. As a result, they renew the loan thereby adding the accumulated interest to the principal. The average APR of payday loans is about 400 percent compared to personal loans that have a max interest rate of 36 percent.
Therefore, instead of going for a payday loan, choose a personal loan. This will save you more money in overall interest. It also has a longer repayment period that won’t put you under any pressure to make payments.
Cover Relocation Costs
Forbrukslån covers the cost of moving to another location. Scenarios that call for relocation include the following:
- A new job in a different area
- The need for more space if you are expecting a baby or want to accommodate older family members
- Separation from spouse
If you are moving to another location because of a job, ensure that your new income can accommodate the cost of living and loan repayment. Additionally, you can take out a consumer loan if you envisage that the cost of moving would be on the high side. Long-distance relocations cost more than local moves but with adequate funds, you can move your vehicle, household belongings, and furniture. This way, you won’t have to raid your savings before settling into your new home.
If you plan to buy or lease a car, RV, boat, or a private jet, you can take an auto loan, but a consumer loan is also available. An auto loan is secure, so you will use the vehicle as collateral. On the flip side, it offers a lower-interest rate than forbrukslån.
However, if you are purchasing the vehicle from an individual, not a company, forbrukslån will help you pay in full without tampering with your savings. Also, if you think you might miss the payment deadline, it is better to apply for a consumer loan than face the risk of vehicle repossession.
Consumer loans (forbrukslån) are great for financing personal needs, but you must use the funds responsibly. Their unique selling point is the speed at which you get an approval or rejection and the funds. Also, they are best for people who do not have collateral or don’t want to take the risk of presenting one. Whether you’re using the money to sort out an emergency or to purchase an appliance, ensure you pay it back on time.