In a consumption-based economy, people need a high purchasing power to access consumption. However, not everyone has the wherewithal to satisfy their immediate needs. This is why forbrukslån is now a thing.
What is Forbrukslån?
Forbrukslån is a Norwegian word that implies consumer financing. It is a type of lending that allows consumers to purchase goods and services and pay at a later time with interest. The interest rate varies from one lender to another. The money can be used for personal purposes such as:
- Purchasing household items
- Purchasing a home or car
- Car and home repairs
- Tuition fee payment
- Refinancing another loan
The loan repayment is scheduled monthly and spread between 24 to 72 months depending on the loan amount and lender. The application process is hassle-free compared to business loans. And in most cases, you do not need any collateral to access funds.
Categories of Forbrukslån (Consumer Loan)
Forbrukslån is in two categories: the repayment plan and whether collateral is needed or not. Let’s take a closer look at both categories.
Consumer Loan by Repayment Plan
This category is subdivided into installment and revolving credit. Installment credit allows you to make fixed payments monthly. Examples are student loans, mortgages, auto loans, and personal loans.
Revolving credit, on the other hand, allows you to borrow money several times a month provided you do not exceed the borrowing limit. However, you must repay a minimum amount by the end of the month. If you do not pay your debt when it is due, it revolves or rolls over to the next month. Examples are home equity, credit card, and lines of credit.
Consumer Loan by Collateral
Loans that require collateral are secured loans while those that do not require it are unsecured loans. Collateral could be in the form of a cash deposit, vehicle, or home. The value of the collateral should be enough to cover the loan amount if the borrower defaults. Examples of secured loans are secured credit cards, auto loans, and mortgages.
Unsecured loans are issued based on trust. The lender assesses your borrowing history to determine whether you qualify or not. Usually, the interest rates are slightly higher than secured loans because the lender bears more risk in the transaction. You can check out forbrukslåntest.com/ to get more information about secure and unsecured loans.
Types of Consumer Loan
The types of consumer loans are:
- Personal loans
- Credit cards
- Auto loans
- Student loans
Personal loans are the commonest type of forbrukslån available in the lending market. They have a wide range of uses such as vacations, purchasing durable household appliances, living expenses, relocation, funerals, and weddings. You can also use a personal loan to pay off existing debt.
This is another popular type of forbrukslån. Here, a credit card issuer grants you access to funds so you can purchase your daily needs. While this gives you access to quick funds, the interest rates are quite high. Also, if you do not meet the deadline for payment, you will pay a fine. Hence, credit cards must be used responsibly.
Buying a home is a huge project and many people cannot afford it with their annual salary/income. Therefore, consumers use mortgages to purchase homes. The loan is paid back in fixed amounts each month over a period of 30 years.
Conventional mortgages require a down payment of about 20 percent and an excellent credit score. However, the Federal Government usually offers a package for low-income earners and people with poor scores. Also, the Veterans’ department offers mortgages to veterans.
Auto loans are used to buy or lease new or old vehicles. The loan term for used vehicles ranges between 48 to 60 months while new vehicles have longer loan terms, between 60 to 72 months. Unlike homes, the value of vehicles depreciates over time. Therefore, if you are using the vehicle as collateral, the lender must ensure that it is worthy enough.
It is advisable to take a short-term loan especially if you want to purchase an old vehicle. This will ensure that you do not end up paying more than your car is worth. Also, if you default, the lender will seize your vehicle and still mandate you to pay the debt.
These forms of credit allow students to access funds for their education. Both the Federal government and private lenders offer student loans but with different terms.
Federal student loans are either subsidized or unsubsidized depending on the financial status of the student. Although the loan amount is capped, the interest rates are fixed and the student does not have to make payments until after graduation. You can click here to see how to access Federal student loans.
Private lenders, on the other hand, offer lower interest rates. But some lenders match their rates with the current market interest rate. This implies that if the interest rate goes up, the interest on your loan will increase and vice versa. Unlike federal student loans, there is no limit to the amount of credit you can access.
Advantages of Forbrukslån
Forbrukslån offers a number of benefits depending on how you utilize it. They include the following:
A Flexible Credit Solution
Forbrukslån has various options that you can choose from, whether you want small or large funds. For instance, with a credit card, you can borrow as much as you want without exceeding the limit and then pay back on the due date. Also, with large funding sources like mortgages and auto credit, you can undertake huge projects and make payments over a long period of time.
Opportunity to Build a Solid Credit Score and History
Before you can access bank credit, you must have a good credit score and credit history. But if you are a beginner, taking a consumer loan is a good place to start. Also, if you have a poor score, forbrukslån offers an opportunity to set the right record.
All you need to do is make payments in good time. If you default by one or two days, it will affect your score negatively. But that’s not what you want. So, ensure you handle funds responsibly to gain favor when next you want to access credit. A good credit score and history give access to low-interest rates.
Access to Goods and Services
With a consumer loan, you do not have to save up sufficient funds before you can access goods and services. You can also purchase items online using a retail card or a credit card. The funds come in handy when you want to purchase both personal and household items.
Fast Approval Timeline
It is very easy to access forbrukslån. You can either visit the lender’s office or interact with them via their website. Most lenders have their application forms online. After filling out the form, you can see the status of the application the same day.
The process does not require heavy paperwork or the presentation of collateral if you do not have one. This type of lending is quite useful in cases of emergencies as you can get quick approval and funding. The lender may either credit your account or hand you a check.
Disadvantages of Forbrukslån
Below are some disadvantages of forbrukslån.
Since you can access credit from several online lenders, you may keep borrowing and get carried away. It also becomes easy to forget deadlines and how much you owe each lender. As a result, the interests will compound, making it harder for you to clear your debts. Worse still, some lenders are loan sharks and wouldn’t hesitate to deploy other means to recover their money.
Additionally, a high level of debt in addition to missed deadlines lead to bad credit score. Therefore, you may not be able to access more credit later, whether for business or personal needs.
Over-reliance on consumer loans can make your family vulnerable in times of emergencies because it reduces your ability to save. At the end of the month, you must pay the fixed amount on the loan before you can solve your immediate needs.
The Bottom Line
Although forbrukslån has its pros and cons, you have to strike a balance between the convenience of accessing funds and the cost of defaulting. Easy access to external funding is good, but it is important to have a good savings culture. This will ensure that you have something to fall back on after repaying the loan.