Borrowing Money: The Definitive Guide

More people are still borrowing money

borrow money the definitive guide

Borrowing money is still the order of the day. It is not without reason that almost everyone knows the phrase 'borrowing money costs money'. So knowing is different from acting according to a science, because there is plenty of borrowing, every day. Borrow money to buy a house or borrow money for a car; it is still the order of the day. You have personal loans and revolving loans and within ten minutes you can borrow an amount of up to 1500 US dollars in 2018. You borrow privately from your brother or father, a loan that not only results in a debt, but also resembles a family feud. But: is borrowing money still so easy in 2018? What do you actually have to meet and can everyone still borrow money and what about the interest rates? Is borrowing like getting out of the rain? Is borrowing wise? Where can you find cheap loans and where can you best borrow? Everything about borrowing, sometimes dire necessity, sometimes the beginning of dull misery.

Give up temporarily to use

First about borrowing. What exactly is that? Well, borrowing is 'temporarily giving it to someone to use'. That's right, in the case of borrowing money, a sum of money is temporarily donated to you to use, for example to finance a car. Borrowing is often free, but borrowing money is different. And not otherwise because you can borrow money in two ways, but differently because you can borrow money in many different ways. Each loan form is slightly different and each loan form has a common denominator: interest that must be paid.

Purchase or rental house, permanent or temporary contract?

You can borrow money via a credit card, a revolving credit, a payday loan, hire purchase, Lewis Carl, a customer card, leasing, borrowing with collateral, loan for residual debt, a PL, via mail order companies, via overdraft or via a WOZ credit. The choice is huge, although you are certainly not eligible for any arbitrary loan form. You have to do something for that. What? In any case, be able to show what your income is and the type of employment you have with your employer, as well as the date you started with your boss. The amount of your housing costs is also relevant, as is the type of home: do you own or rent a house? Also quite important is the BKR listing and whether you have children and if so; they still live at home. Please note: it is not a matter of just indicating, but a matter of being able to submit the documents proving this. So arrange paperwork if you are planning to apply for a loan and want an answer to the question: how much can I borrow.

'Looking at your personal situation'

What every lender actually does after each credit application is based on the data provided to see how great the risk is of providing you with a loan. Too much risk is not a loan. And the data they request from you is simply necessary for that. Just think: it is often more expensive to spend with children living at home. After all, you also do more shopping, you have to deal with school costs and they participate in a sport and therefore have to pay a contribution. The more you earn, the greater the chance that the provider is willing to lend you money. Providers consider the type of employment as follows: a permanent contract is counted as one hundred percent, if you have a temporary contract, they count it as seventy percent of the income. Just like a very expensive Lewis Carl could be a reason the provider refuses to lend you money. And perhaps that is just very sensible if you are barely able to meet the monthly mortgage payments. Providers call assessing your data 'looking at your personal situation'.

Subordinated loan

Then about the different loans out there, starting with the common and well-known mortgage loan, also known as taking out a loan against collateral. You borrow money to buy a house, your house is the collateral. You then pay interest and principal to the bank. So a clear loan. If you do not pay, the provider will simply seize your house. As simple as that. A PL is a personal loan: a loan to purchase things other than a home. A riskier loan for providers because there is no collateral. That is why the interest on this loan is often higher than on another loan. With a revolving credit, the loan amount is not fixed. You withdraw money according to your need, and also pay it off. A subordinated loan is not a loan for less developed people, but a loan that is mainly taken out by companies and is only repaid when the other creditors have been paid. This way of borrowing is also a loan for the provider that involves more risk and therefore higher interest rates are also charged. Flash credits, online loans, are loans with a maximum term of three months. If you do not pay on time, you often pay high extra costs.

Borrow privately

A special loan form among all other loan forms is the private loan. This is a loan that you take out with family or friends, for example, without the intervention of a bank. The borrower and the requester negotiate directly with each other about the amount of the loan and the conditions attached to the loan.

'Can I borrow money from you, of course you will get it back as soon as possible'
'Of course, that's fine. I will transfer it as soon as possible. Give it back if you got it '

See here, the perhaps recognizable and very tough negotiations about private lending between people who are either family or friends (then at least). Borrowing privately is often very flexible. You can take much longer to repay the loan than the much stricter conditions that apply at a bank. Moreover, your parents, your brother or your neighbor will not call the BKR in Tiel, they naturally trust you in your blue eyes. It will all be fine, we have known each other for so long and a friend or family member is happy to help you out.

WOZ credit

The formerly also known WOZ credit is no longer, long live Homeowner loan or Homeowner Revolving credit; loans that have been specially developed for people who own a home. Homeowner loan is a loan with a fixed term and a fixed interest rate. That rate is lower than for people who rent a rental home and, moreover, as a home owner you borrow a higher amount. If you use that amount for a renovation / improvement of the home, you can even deduct the interest costs for tax purposes, provided you meet a number of conditions. Another form of borrowing is hire purchase. In that case, you make a down payment and repay the rest per month (interest / repayment). The biggest difference with a loan in a personal capacity is that with hire purchase you are not the owner of the product, with a PL you are. Hire purchase and cars are also often referred to as leasing. Even now, however, there is a big difference. Through hire purchase it is the distribution that you eventually become the owner of the product, with leasing this is not the case.

Tax authorities are always around the corner

Lending privately is often seen as awarding and interest is often not or only minimally charged. While with this loan you should never agree on an interest that is too low, but an interest rate that is in line with the market. You do not do this to bully the customer, but because the Tax Authorities will come into play differently. If you use an interest rate that is too low, the Tax and Customs Administration will say that there is a donation and tax must be paid on that donation. Another thing about the tax authorities; suppose a private loan is taken out for the purchase or renovation of a house, the tax authorities see this as mortgage interest. The interest paid can then be entered as a deductible item. In reality, private loans are often only contracted verbally. A man a man, a word a word. Nevertheless, it is good to put everything on paper, in order to rule out any possible misunderstandings. In case of an oral agreement and after an argument has arisen, both parties have no burden of proof that has legal value. Numerous model contracts are available on the internet that are easy to use if a private loan is taken out. This is good for both asker and giver.

The popular car loan

Money is often borrowed for the purchase of a car - preferably with light metal rims, of course, and equipped with a navigation and audio system. The loan for the purchase of a car is popular and was created and viewed as a specific loan by financial institutions. Why? Because this loan is different from a loan in a personal capacity, although you would initially think that these loan forms are almost identical. A loan for a car is an installment loan. You want to buy a Mercedes, the bank will lend you exactly the amount you need to purchase. After just one month you start paying off the amount deposited by the provider and you are obliged to repay a predetermined amount to the bank every month. The largest part of this amount is intended to pay off the loan itself, the other part is the costs. A car loan is a commonly used loan because you can simply buy a more expensive and luxurious car and repay the amount in monthly installments can and may be. A car loan is not expensive. This is because the car can possibly be seized if the payment obligations are no longer Demorei. This gives the provider a little more certainty. The monthly shrinking of the debt also means that there are not very many costs associated with a car loan.

Borrow cheap money

Most people who plan to borrow look for the provider that offers the best conditions: the cheapest loan with the lowest interest. However, the provider with the most favorable interest rate is not also the provider with the cheapest loan. In addition to the interest rate, it is very wise to study the conditions very carefully. For example, penalty-free repayments are not possible with every lender. Example? You know that at the end of next year you will be paid a large amount - family money, we will leave the details out for a moment. You want to use that amount to repay all or a large part of your loan. Sometimes the providers do not want this, after all they earn money from the loan taken out to you. Suppose you have agreed on a term of about five years. If you pay off much earlier, you also pay (much) less interest. That is the reason that there are providers who charge extra and sometimes quite high costs for early repayment.

Take out mortality risk or not?

One more thing, to be complete. What will happen to your loan if you die? In any case, know that your revolving credit or your personal loan will not automatically expire. Usually the next of kin must pay off the loan. If you do like this, do nothing and confront your next of kin with sky-high debts when you yourself are no longer there. The group that does not want this to happen can take out a life insurance policy. This can also be done in different ways. The best depends on the type of loan you have taken out. Let yourself be informed about the possibilities, unless you grant your next of kin financial malheur if you have exchanged the temporary for the eternal.

BKR

People who want to borrow money and who cannot get this done, sometimes want to get angry with three letters: the B, the K and the R. All the fault of the BKR. The mean ones. BKR stands for Bureau Credit Registration and this institution registers all loans that you have and that you had in the past five years. Many people think that if you have a report at the BKR, this is negative. However, this is nonsense. Only the registration of the loan amount is important, as well as whether that amount is still open or not. If you apply for a loan, a call is always made to Tiel first, because the BKR is located there. That much is certain.

Credit agreement

In Tiel people have your name, your date of birth and your address and current information about the amount you have borrowed, your maximum amount to be spent, as of when the credit agreement started and the month in which the agreement ended. If you have payment arrears that are longer than three months, the BKR will also know this. To make it easier to work, the BKR works with codes. In this way it is quickly clear what your status is and whether you can borrow money safely. If there is an A after your name, you are in arrears. If the arrears have been cleared and the loan is still running, the BKR will change the A into an H. In the H of Herstel. If the backlog has disappeared and the agreement has been terminated, the A or the letters AH will remain behind your name, along with the date on which the loan was terminated. Moreover, the BKR works - how exciting - with five special codes, codes that are used if, for example, a payment arrangement has been made or if you cannot be reached and you seem to be on the run. When the issue of unreachability comes up, it will undoubtedly be a difficult story to get a new loan. Or better: then you can shake it. Only five years after the loan has been terminated, the data is transferred from the system in Tiel, which therefore mainly revolves around amounts and codes.

Interest of fourteen percent

If the BKR is positive about you and a loan is possible, then the interest - and especially the interest rate - is very important. The fact is that the highest possible interest rate of fourteen percent applies to credit cards, overdrafts and orders from the well-known mail order companies. The amount of the interest depends on a number of aspects. An important one is the level of the purchase costs of the amount to be borrowed. The amount of risk, the so-called profit margin mark-up and the amount of the loan also play a role. Furthermore, the administration costs mark-up and the marketing costs often also become a role.

Borrow money online

Yes, you can borrow money without consulting the BKR. For example with your mother or your grandmother. It can also be done via providers who lend amounts between 100 and 1500 US dollars online, also to people who have a BKR listing. In fact; it is possible to do this online within ten minutes, without the need for a piece of paper. Be aware that these providers often charge enormous interest rates. By borrowing from these parties you are out of the fire for a while, but - if you are not careful - you are back in it.

Payment arrears

Despite the extension of rules, more is still borrowed. In the Netherlands, for example, there was some 16,560 million US dollar in loan money at the end of last year. It is also striking that fewer and fewer people have payment arrears. Research further showed that people are willing to borrow, in particular, for a car, caravan and home improvement in the form of a renovation or conversion. The personal loan is very popular because the interest is fixed and people apparently prefer not to have to deal with uncertainties. The chance that interest rates will rise sharply in the coming period is also high. This has to do with the unrest in the world and the trade war that exists between Europe and America. Banks are known for charging a higher risk premium in order to better protect themselves. Consequence? Borrowing money is becoming more expensive and people with debts pay a lot more interest with all the dire consequences that entails. The snowball then rolls on very fast and can thus cause serious problems in the financial sector, because debts cannot be paid off.

Borrowing and ageism

Borrowing money is custom work. BKR codes play a big role as explained, and things like net income and employment are also important. Age is also a factor to take into account. This is certainly the experience of people who are getting older. Imagine you are about 75 years old and you want to buy a new car and want to borrow money for it. Make sure that in 99 out of a hundred cases you will get zero on the case. Banks consider it risky if they provide loans to people who have passed the age of 75. Statistically, it is a fact that they are much more likely to be unable to repay the loan in full, compared to much younger people. Just think: many providers cancel the residual debt in the event of death, otherwise the next of kin will have to pay. But what if there is not enough to inherit? Although the victims - those aged 75 or older - consider it age discrimination, it is merely a commercial consideration of the providers to proceed in this way, a method that is also understandable.

Moreover, a loan is most often applied for in the province of Flevoland. In Friesland, the least amount is borrowed and people between the ages of 51 and 64 usually borrow the most: around 20,000 euros. People between 18 and 30 years old most often apply for a loan, but this group borrows the least: on average 8400 US dollars. People borrow more with children than without. And that too is anything but illogical. Children cost money, the chance that you will take out a loan is simply greater. No parent wants his or her child to be short of anything.

Apply for a loan?

Check one of the many credit comparators on the internet in the search for the cheapest personal loans and the answer to the question where can I borrow money and where can I borrow money quickly. However, always be wary when you borrow. Realize that bankruptcy and breakdown in the family are dangers that lie emphatically. And above all know: borrowing money costs money.

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