A personal loan (= installment loan ) is a fairly simple formula and perhaps the simplest form of credit on the financial market. It allows you to finance a new car, your wedding or new furniture.
With a personal loan (= installment loan), it will usually be limited amounts. It is therefore not used to buy a house, but rather to finance new furniture for a trip. Normally no deposit will be requested, but that does not mean that your financial institution can not request proof of purchase.
How much you can borrow depends on how high your net income is and how many other loans or credits you currently have. If your loan burden is already heavy, it will be harder to borrow larger amounts, but that is the case with every type of loan or loan.
An installment loan sometimes comes with many denominations. Renovation loan, holiday loan or loan for marriage are denominations that banks sometimes dare to use to position themselves in the market, but ultimately it all remains the same and all are personal loans. A car loan is different in that respect, because the car can be used as collateral.
Loan amount and term
A personal loan will usually start from around 2,500 euros to 75,000 euros. Some institutions offer personal loans up to 100,000 euros, but if the loan exceeds 75,000 euros, check whether it is still a personal loan! After all, a personal loan is an installment loan and this is a form of consumer credit . According to the law on consumer credit, there is currently a maximum of 75,000 euros.
The term is usually determined in function of the amount borrowed and this can fluctuate between 12 months (minimum) and 84 months. The rates are agreed in advance so you will not be faced with surprises.
Interest rate personal loans
The interest rate on an installment loan will generally be cheaper than with a revolving credit , but slightly more expensive than the interest rate on a mortgage loan. In addition, with a revolving credit you only pay when you withdraw your money reserve , while with a personal loan you will receive your money once and then pay it back to the account for a predetermined time.
The rate may also vary depending on the loan amount. Read more in the article our tip on how to pay less, by borrowing more!
Benefits of a personal loan
With an installment loan you are able to make your purchase immediately, as you will receive the loan amount on your account at the start of the loan period. It all goes pretty quickly and after approval the money is simply deposited into your account. It can therefore be used for many purposes, in contrast to a car loan that is only intended for the purchase of a new car.
The interest rate, the term and the repayment amount will be fixed, so you know in advance how much you have to pay back. Is the loan used to carry out minor renovation work on your property? Then in some cases you can contribute the interest of this loan to your taxes.
So there is a lot of clarity beforehand regarding this form of borrowing. Those who like this and for example are not waiting for a bonus to pay the loan in 1x times, will certainly find a personal loan useful.
Disadvantages with a personal loan
With a personal loan it is not that interesting to pay off early. If you want to pay off the loan earlier than expected, you will pay fines on it. In terms of flexibility, this loan therefore scores slightly lower.
The borrowed amount can not be withdrawn again, in contrast to a revolving credit. Who would like to have the opportunity to withdraw money can look forward to a money reserve.
Find the best personal loan
You can always benefit by performing online simulations and comparing loans. This is no different with personal loans. Comparing means saving because you can find the cheapest personal loan with the lowest interest rates and compare different formulas and conditions.
Start with comparing personal loans:
Interest rates are a snapshot. They are therefore purely informative and temporary, can undergo changes and / or be dependent on the loan amount.
Representative Example : Loan on payment of € 50,000.00; Term is 120 months . You pay € 516,02 monthly for a JKP of 4.50% . The total amount to be repaid is € 61,922.40. For an exact calculation, request an offer from the above parties.
TIP : Are you looking for a new loan to buy a car? Then it will be cheaper to take out a car loan instead of a personal loan.
TIP 2 : Sometimes it is cheaper to borrow something more than you actually need. The reason for this is that you might be in a disk with a lower annual percentage rate. Example: The APR for a loan of € 5,000 can be higher than with a loan of € 5,100; Your bank will not start it yourself, so be sure to do your homework!
Personal loan to start business?
It may well be that you need a little bit of money as starting capital for a new company. You must submit these funds from your private office to the company and you will receive shares in their place.
If you do not have a reserve on your savings account, you may be able to call on a personal loan to get the starting capital, as there is not always a reason to give up a personal loan. Does the bank still want proof of what the loan is for? Then you can forward the financial plan.
A revolving credit or a personal loan?
Your choice will depend on your personal needs and wishes, but we will list all the differences for you:
As you will notice, a personal loan will be cheaper than a revolving credit and you will not be faced with any surprises either. You lose a lot of flexibility.
Are you looking for a loan for a one-off purchase? Then a personal loan may be the best choice for you. Do you prefer a money reserve that is always available for the times when you need it? Then you should look at the possibilities with a revolving credit.