Calculating a loan: tips to lend money wiselyOn July 26, 2019 by Linsey Metivier
Every month thousands of people search online for ‘loan calculation’, looking for a loan that suits them. Most loans are taken out for a car or home improvement.
A loan always has financial consequences
Not everyone is aware of this when comparing loans. A study by the Ubod, for example, shows that about half of the borrowers would have preferred to borrow less on closer inspection. In most cases it concerns people who have not thoroughly studied the consequences of a credit such as a personal loan or a revolving credit.
How do you avoid regreting your loan? And how do you ensure that borrowing money turns out to be the best choice for your plans? 5 tips you can look out for when lending money wisely.
What should you pay attention to when you take out a loan?
A loan always includes a repayment of the loan amount. Plus the interest. So you always pay more than the ‘net’ amount borrowed. The interest and conditions may vary considerably per loan. And then there is your personal situation, which may change during the term of your loan. That is why it is a good idea to take the following 5 things into account when comparing a loan.
1. Do not borrow on your maximum
Are you planning to work less or will family expansion be coming? This can have consequences for your financial allocation: you start earning less and / or you have more expenses. Therefore consider not taking out your maximum loan amount when taking out a loan. Then you have the greatest chance that you can continue to pay repayment and interest without any problems. Calculate via our calculation tool ‘how much can I borrow’ what your maximum borrowing capacity is and how much you want to borrow.
2. Coordinate the duration well
Does the duration match the spending objective? Very annoying and demotivating if you have to pay for years for that car that you no longer enjoy. Therefore, use common sense when comparing loans: you have the best insight into your financial behavior. On our website you can calculate which repayment amount you can and may miss each month. But you know best whether the calculation is realistic. View which loan type suits you best with the loan guide.
3. Borrow cheaper for homeowners
Homeowners pay a lower interest rate than tenants. An additional advantage for homeowners is that you can use interest deduction if you invest the borrowed money in your home. Think of home improvement such as solar panels, heat pump or renovation.
4. Pay rebuilding from consumer credit?
Do you expect renovation costs below 40,000 – 50,000 euros? Then borrowing money via a consumer credit (personal loan or revolving credit) is definitely an option. With a personal loan you can even use interest deduction.
Whether you pay for a renovation better from a consumer credit or from a second mortgage depends on a number of factors. The disadvantage of a loan is that the interest is higher than with a (second) mortgage. On the other hand, the term of a loan is (much) shorter than with an additional mortgage. So you have higher monthly costs, but the payment is much faster. In addition, the closing costs of a second mortgage are thousands of euros. You do not pay anything for taking out a personal loan.
The circumstances are different for everyone. We therefore advise you to compare extra well between the different providers for a renovation.
5. Pay attention to the conditions and small print
Many people want to take out a loan so quickly that the conditions and fine print are skipped. What should you always pay attention to?
Is the loan insured?
Will the loan be canceled in the event of death? Or do you have to take out an ORV for this yourself? Are the advice or closing costs for the ORV included in the interest or do you have to add it to the interest?