A bank loan can be used for everything from a last-minute trip to your dream destination to a new house or the salary to a consultant
Almost all adult US citizens have experience of taking out a bank loan. It is simply something most of us need, several times in our lives. With a bank loan, it is possible to buy something now, and pay later, for a fee in the form of interest. To be able to get a bank loan, you enter into an agreement and if you do not follow the terms of the agreement, the consequences can be serious for you. So you should not take this too lightly with borrowing money, but also do not refrain from bank loans if it can really create value or solve a problem. The prerequisite is that you feel confident in being able to repay the loan.
A bank loan can be used for everything from a last-minute trip to your dream destination to a new house or the salary to a consultant a company needs to hire to be able to expand its business.
Different types of bank loans
You can not really generalize so much about bank loans because there are several different types of loans that all have their own terms and conditions. Here are the most important and common bank loans today:
Car and boat loans
Quick loans are loans that meet two criteria. You should be able to get money immediately and it is a short repayment period that applies. How much you can borrow varies, but usually, it is a small amount, up to 10,000 kronor. SMS loans are a common type of quick loan where you are notified if you have been granted the loan via SMS.
A private loan is a loan you use for private consumption. Bank loans of this type often start at around SEK 10,000 and you can find banks that are willing to grant loans of several hundred thousand kronor in this category. Something that characterizes both private loans and quick loans is that the lender will not be interested in what the money is to be used for, but it is up to you.
A group loan is a slightly larger bank loan that you use to repay several loans and credits in smaller amounts. The point is that in this way you will be able to reduce your monthly expenses. A bonus with bank loans in the form of group loans is that there will be fewer repayments to keep track of.
Home costs so much that it is difficult for most people to save up for it for a reasonable amount of time. That it is possible to take out favourable mortgages is therefore very important. Be sure to compare mortgage rates. Since these can be very large amounts, it is important to choose a mortgage with as good terms as possible. The choice between fixed and variable interest rates can also be of decisive importance when it comes to this type of bank loan. In the case of a mortgage, it is in practice the bank that buys part of the home. You do not own it until the loan is repaid.
Car and boat loans
You can borrow for a car or boat with a regular private loan, but you can also choose a special type of bank loan where what you buy acts as security for the bank loan. This way you get the interest rate down a bit but the bank will require that the car or boat is insured until the loan is repaid.
A credit is a credit that you always have access to as long as you are on the right side of an agreed credit limit. It is a convenient alternative to other loans because you only need to apply for it once. Then you always have access to a financial buffer when you need it.
There are only very few companies that never need to take out a loan. A company can use a bank loan for everything from investing in the production and development of new concepts to solving temporary problems with liquidity.
Your credit rating determines how much you can borrow
In order for you to be granted a bank loan, the bank must perform a credit check and determine your credit rating. This is done with the help of a credit reporting company that retrieves information about your finances from various registers. The information is set in relation to the bank's specifications and the result is usually that you receive a credit rating that is valid from the lender who ordered the credit information. The larger the bank loan you applied for, the higher your credit rating.
The factors that matter most to your credit rating are:
How much-taxed income you have
If you have payment remarks
If a lot of credit information has been done on you
If you borrow a larger amount, a thorough review is made by an administrator, but for most forms of loan, the credit information is handled completely automatically. You can be notified if you have been granted the loan within a few minutes. When it comes to bank loans to companies, you look at the company's latest financial statements and often also at the owners' finances. This is especially true if it is a sole proprietorship where the company is not a legal entity but linked to the signatory's finances.
You can get a bank loan despite payment remarks and a low credit rating
Today, there are banks and credit market institutions that specialize in borrowers with low credit ratings. The interest rate will be higher than if you are considered to have good creditworthiness because the lender takes a greater risk. Payment remarks are a major obstacle when it comes to many bank loans, but if your income is high enough, you can take out a bank loan with payment remarks. Please note that not all notes are valued equally. A new payment remark is "worse" than a remark you received a long time ago. There is usually a limit to how many payment remarks you may have and still be able to be granted a bank loan.
If you have unpaid debts that have gone all the way to the Enforcement Officer, you will not be able to get a loan. The bailiff can make foreclosures and also decide which of them you owe money to get something back. In that situation, it is quite easy to understand that it is difficult to get a new loan.
Bank loans with security
Most loans, such as unsecured loans, quick loans and private loans, are all unsecured bank loans. Sometimes, however, the bank needs some form of guarantee to grant the loan. Security is in that case something that you leave as a mortgage when you take out a bank loan. Vehicles and real estate are the collateral that banks accept when it comes to loans to private individuals. Then it is what you borrow that acts as a mortgage for the loan. If you do not repay your bank loan according to an agreement, the deposit is sold so that the bank can get back what you owe.
Here are some common types of bank loans:
The car and boat loan
Larger corporate loans
A bank loan with a creditor is an alternative to borrowing with security. In that case, a person other than the borrower accepts the loan and takes over the payment responsibility if the borrower is unable to repay on time.
A bank loan with co-applicant and creditor
When it comes to many bank loans, you can be two people applying together. One person is then usually the main applicant and the other is often called a co-applicant. Having a co-applicant means that the chance of getting good conditions increases. It can also be easier to get a bank loan at all if there are two people who can be held responsible for the loan. A creditor is a person who assumes responsibility for the repayment of a bank loan if the person or persons who received the loan are unable to repay it.
Fixed and variable interest rates
The interest rate on a bank loan can be either fixed or variable. Variable interest rates mean that they are set on the basis of external factors such as the Riksbank's policy rate. If the general interest rate situation changes, so will the variable interest rate. Fixed interest can be said to be a form of insurance against a sharp rise in interest rates. The interest rate is tied to a certain level and does not change during the fixed term, regardless of what happens to the key interest rate. The fixed interest rate is, at a given time, higher than the variable rate. You, therefore, pay for the insurance that means having a fixed interest rate.
It is not least when it comes to mortgages that it is common to talk about fixed and fixed interest rates. Historically, variable interest rates have almost always paid off. If you think that the interest rate may rise in the not too distant future, however, it may be safe to tie the interest rate. With fixed interest rates, it is also easier to plan the economy because you know exactly how high the interest expense will be. A bank loan can also have an interest rate where one is fixed and another tied up.
Basic requirements for getting a bank loan
Banks can set different requirements for what you have to live up to in order to borrow a certain amount, but the basic requirements for you to have a chance of getting a loan at all are similar.
You must live up to the bank's age requirements, often 20 years, but some banks allow you to take out a loan immediately when you reach adulthood. There may also be an upper limit. If you have turned 75, it is more difficult to get a bank loan.
You need to be registered in the USA.
You need a fixed income, how high it must depend on how much you want to borrow. What counts as a fixed income can vary. In special cases, study grants or unemployment insurance funds may be sufficient.
You may not have unpaid debts to the Enforcement Officer.
A bank loan must be repaid within a certain time. As a rule, the monthly interest rate falls if you choose a longer repayment period, but the total cost of the loan becomes greater the longer you take on it to repay it. You often decide for yourself how long the repayment period should be (within certain limits) and the choice is about making a trade-off. It may be a good idea to choose a slightly longer repayment period but to repay the loan in advance if the finances would allow it. It is also a great advantage with bank loans that have flexible terms so that you can also extend the repayment period without it costing a lot.
What to consider when comparing bank loans?
The most important thing is to be clear about how high the total cost of a bank loan will be. This applies not only to the interest but to interest + all fees, such as notification fees and the loan's set-up cost. Compare the small print terms so that you are not surprised by any hidden fees. It should also be possible to take out a good bank loan with a repayment period that suits you. If you need money immediately, it is, of course, important that you can get paid quickly.
If you want help comparing bank loans, it may be a good idea to contact a loan broker. They offer a service that means you can get many offers on bank loans that meet your criteria by filling out a single application. In this way, you also avoid having a lot of credit information taken on you.