What is a consumer loan? When should I raise a consumer loan? These are questions you might need answers to. In this article, we explain to you, among other things, what a consumer loan is, what uses it, and in what situations you should not raise a consumer loan.
In short, a consumer loan is a loan without collateral. This means that when applying for a loan, you do not need to provide assets as collateral to the bank. If the loan were to be defaults, the lender would not be able to sell either housing, car or other assets to cover its receivable. Consumer loans thus entail a higher risk for the bank. It appears from the loan interest.
What are consumer loans used for?
Consumer loans can be used for anything. The most common reasons why people raise consumer loans are:
- When unforeseen expenses arise.
- When refinancing debt.
- Upon renovation.
Unforeseen expenses may be, for example, that your car needs repair or the washing machine has failed completely. The vast majority in this country are dependent on both car and washing machine in everyday life. It must therefore be fixed as quickly as possible. If you do not have money for this right away, consumer loans can then be an alternative.
Housing renovation is also a common area of application for consumer loans. Renovation can cost up to several hundred thousand kroner. Especially if you don’t do it yourself and have to let someone else do the work for you. Those who do not want to live with a tired kitchen or bathroom for years, and who have not saved enough funds for refurbishment, then gladly bring up a consumer loan to pay for the renovation. Although, given the interest costs, the loan is not profitable, many believe that the result after the renovation is worth it.
Consumption loans for refinancing mean that you raise a loan to cover the debts you have from before, but then at lower interest rates.
What does a consumer loan fit for?
All the uses of a consumer loan as mentioned above have one thing in common: the loan is used for the acquisition of assets or other benefits. In other words, you are left with something in the end. The problems with consumer loans occur when you are left with nothing after the money is spent. Examples of what a consumer loan should not be used for are:
- To serve other debts
- for general consumption
When it comes to applying for a consumer loan, there are also some minimum requirements for banks. These basic requirements will vary from bank to bank, but the lowest requirement that is made today is that the loan seeker must have reached the age of 18, have fixed income, and not have payment remarks or debt collection cases. Some banks also require that you have income of over NOK. 200,000, or more, while others do not specify minimum income requirements.
Briefly summarized, a consumer loan is a loan you can get granted without lodging any kind of property or property. The best uses for consumer loans are refurbishment, repairs and refinancing of other debt, and you should not raise consumer loans if you are left with nothing in the end.