Do you want to borrow money but are you not yet aware of the different forms of borrowing money?
Then here is a brief explanation of the different types of credit :
There are two different forms of credit, the revolving credit and a personal loan.
Borrowing a personal loan is a suitable form of money if you want to be sure of the term, the interest rate and the monthly installment in advance. This is all fixed with a personal loan. With a personal loan you have a fixed interest, so there is no chance of interest rate fluctuations. In addition, you agree a fixed term for the loan in advance with the bank. With a personal loan you always know where you stand. The moment you take out the loan, you already know when your last monthly installment will take place.
Does a personal loan also have disadvantages?
The personal loan has a significant disadvantage and that is that you cannot make interim repayments without penalty. You can redeem whenever you want, but a fine is always due. Since July 1, 2011, this fine has been a maximum of 1% of the amount. For old financing contracts dated before 1 July 2011, the fine can be as high as 5% because the old rules still apply.
In addition, it can be experienced as a disadvantage that it is not possible to make withdrawals from the credit in the meantime. The repaid part of the loan is no longer available for withdrawal. You will have to take out a new loan if you are still just short of something.
There are various forms of revolving credit, a revolving credit is almost the opposite of a personal loan. A revolving credit is a flexible form of borrowing money. You can pay off as much as you want at any time. If you have made repayments, you can also withdraw amounts up to the agreed credit limit. You can even opt for a revolving credit where you only pay the interest. Or a revolving credit where you pay a percentage of the outstanding balance. Borrowing money with a revolving credit is flexible borrowing money.
Does revolving credit also have disadvantages?
The big disadvantage of a revolving credit is the variable interest, which means that the interest can be increased or decreased. You do not know in advance when this will happen and by what percentages the interest will be increased. In addition, there is also the temptation to continue to withdraw the money up to your credit limit, so there is the risk that you will not get rid of the loan.
Types of revolving credit:
Continuous credit with a fixed monthly term (percentage of the credit limit): With this form of revolving credit, you pay a fixed percentage of the credit limit per month. For example, if you take out a 1% revolving credit for a $ 10,000 credit, your fixed monthly installment is $ 100 per month. This monthly installment then includes both the interest to be paid for the loan and the repayment. With this form of borrowing money, you repay a part every month, which you can also withdraw. You will usually receive a card with which you can also make withdrawals from your credit.
Interest-only credit: With this form of credit, you take out a loan where you only pay back the interest. The advantage here is that your monthly installment is very low, as you only pay the interest. You can make extra repayments on your credit whenever you want without penalty. Borrowing money with an interest-only credit is borrowing money with a low fixed monthly term. The disadvantage of this form of credit is that the credit can have a very long term. This is because you are not obliged to make repayments on the credit. Nowadays this form is closed less and less because the financing companies are imposing increasingly strict rules for interest-only credit.
Balance credit: With this form of borrowing money you pay a percentage (1 / 1.5 or 2%) of your outstanding balance. This is different from the revolving credit with a fixed monthly term. This form of revolving credit is provided by only a very limited number of banks such as Shineloan and Onebank. The big advantage of this form of borrowing money is that your monthly installment decreases if your outstanding balance decreases. This can be extra motivating to make extra redemptions in the meantime. After all, you will then be rewarded with a lower monthly installment for your loan.
WOZ credit: The WOZ credit is a form of credit that is currently provided by Onebank and Shineloan, these banks give you a small discount (up to 0.3% of the annual interest) because they can claim your home earlier as extra security. . This form of borrowing money is only available to homeowners. A WOZ credit can only be provided if the mortgage registration is lower than 150% of your WOZ value. If your mortgage registration is higher than 150% of your WOZ value, a WOZ credit is unfortunately not possible.
Withdrawal credit: With a withdrawal credit you pay 1 / 1.5 or 2% of the highest withdrawn balance. This has the great advantage that an extra barrier is created to make a withdrawal from your credit. Borrowing money is nice, but the big disadvantage is and remains that it also has to be repaid again. With a withdrawal of credit, the monthly installment remains fixed at the agreed percentage of the highest drawn balance.