When it comes to something like a loan, it can be difficult to take the first step and actually start considering them seriously. While it may seem tempting to simply “wing it” and go for the first loan that we see or could potentially be approved for, it tends to be a better idea to do some research first.
Of course, this isn’t always going to be the easiest thing to do. That’s why we’re here today: to help provide you with a guide on how to get a loan in the new year. Not much has changed in the process of course, but with each year that passes, economies change and geopolitics shift. All of these things can impact the rates that we get on loans as consumers and businesses alike.
Now, if you’d like some background information, it may be worth checking out this page: https://www.aeaweb.org/articles?id=10.1257/app.20210683. Otherwise, stay tuned to learn more about this process and how you can get a loan with as little hassle as possible!
The Basics of Loans
Before we delve into some of the particulars as far as applying for loans, let’s take a moment to consider what they are. You see, a loan is a sum of money that is borrowed from a lender with the agreement to repay it over a period of time, typically with interest. This is something that most of us are well aware of already, of course, but it’s worth keeping in mind.
Types of Loans
One of the most important things to know about loans is that there are a lot of different types of them. Each type has its own purpose and terms, so we’ll be covering a few of them here.
Personal Loans: These are perhaps the most common type of loan these days, as they’re ones that are geared directly towards consumers. Most of the time they’re a type of unsecured forbrukslån, though it’s not unheard of for them to be secured (meaning that they require collateral). They’re popular because they don’t require or ask for a specific purpose from the borrower, meaning that you could use them for a wide variety of purposes.
Auto Loans: As the name suggests, these are credit agreements that allow borrowers to purchase a car. Just remember that while these loans will cover a large portion of the purchase (that you will then pay back over time), you’ll still be responsible for the down payment on the vehicle.
Mortgages: Similar to auto loans, these are a type of loan that’s dedicated to allowing consumers to purchase a home. Again, you as the borrower will remain responsible for the down payment on the property. Still, mortgages allow for greater flexibility – let’s face it, most of us probably don’t have enough liquidity to buy properties in cash right up front.
Student Loans: Here in Norway, student loans aren’t very common. However, if you decide to travel abroad for some reason or study in a country that doesn’t have free public education, they can quickly become relevant. It’s at least worth knowing they exist in case that situation ever arises.
Debt Consolidation Loans: These loans are used to combine multiple high-interest debts into a single loan with a lower interest rate. This can in turn simplify repayment and potentially save the borrower money on interest payments. While they can seem complex at first, they’re worth looking into – and they’ve quickly become a rising type of credit agreement across Norway.
Payday Loans: These are short-term loans that are intended to cover immediate financial needs until the borrower’s next paycheck. They often come with high fees and interest rates, making them a costly borrowing option. It’s best to be wary if you’re considering this as an option, as it will likely cost you far more than the cost of one paycheck.
Choosing a Loan for Your Needs
Now that we’ve covered some of the basics of loans, as well as the various types that are out there, we can turn our attention to how we can pick a loan to apply for. That said, there is a general strategy that you can follow in order to do so!
Why Are You Borrowing Money?
The first thing you’ll want to do is define your purpose for the loan. What is your overall goal or objective? Understanding your purpose will help narrow down the type of loan that suits your needs, especially considering how many are geared for a specific purpose. If you don’t find that your objective fits into one of those categories, there’s a good chance a personal loan will be your best bet.
Consider Your Finances
Before you ever submit a loan application, you should evaluate your current financial standing. This should include your income, expenses, and any existing debts. Consider your ability to make regular loan payments along with your other financial obligations and try to formulate a budget if you can. You can read more about how to achieve that if you’re looking for some tips and tricks.
How Much Do You Want to Borrow?
Naturally, the amount of the loan you’re after will have an impact on several aspects of the application process. The important thing is to ensure that what you’re after will adequately cover your expenses while still aligning with your financial capabilities to repay it comfortably. This way, you can avoid having to change your current lifestyle due to expenses outside of your price range.
Do Your Research
You’ll want to look into several different lenders before you decide on one to work with, even if you’ve already got a financial institution that you’re comfortable with. Whether you’re truly interested in the other options or not, if you can find a lender that offers a better rate, it could give you some leverage in negotiations. This will depend on individual circumstances, of course.
Luckily, just by reading this article, you’ve already done some research! Don’t forget that there are a ton of websites and platforms that allow us to directly compare the various rates that are out there for things like interest as well as monthly payments. Finally, this can help you to consider both traditional lenders like banks and credit unions, as well as online lenders.
Consider Your Credit Score (and Credit History)
A key part of this process is to understand your creditworthiness and credit score. You see, a higher credit score often helps in securing loans with better terms and interest rates. If your credit score is low, it might be worth improving it before applying for a loan. With that said, thankfully there are still plenty of borrowing options even if your score needs some improvement.
Understand the Terms and Conditions of the Loan
When you’re approved for a loan, you’ll be offered a contract to sign that will detail everything you need to know about the credit agreement. While it can be very boring to read through all of these documents, it isn’t a bad idea to do so. If you have a financial advisor, it can be helpful to have them read over it as well to ensure that you aren’t missing anything.
Overall, it’s most important to pay attention to the interest rate, repayment period, fees, penalties, and any potential consequences for late payments or default. This will help you to make your final decision – if there’s any part of the terms you aren’t a fan of, it’s worth at least talking to your lender to see if some adjustments can be made.
Applying for loans can be quite a challenging and intimidating process. Hopefully, this guide will help you approach it with a bit more ease at least – it doesn’t have to be nearly as complex as it seems!