As everyone knows, interest rates are at a historically low point and banks and governments can borrow money without having to pay interest at all. Even on your savings you get either no or very little interest. But is this a good time to take out a loan? In the article below I will try to explain whether this is the case and why. We can divide money into various categories: revolving credit, personal loan and mini loan. You will see that they all have their own characteristics and also differ in interest rates. In general, the higher the loan amount, the lower the interest.
The interest on the revolving credit is around 4.5% at the time of writing. This means that the lender only has a small credit for providing this. The lender must also pay for costs incurred, because these may not be passed on (separately) to the consumer.
Interest can change
The disadvantage of the revolving credit is that the interest can change in the meantime. If interest rates rise worldwide or your personal circumstances change due to, for example, unemployment, the lender may change the interest rate. Of course, the interest can never exceed the legally determined maximum (14%). But look carefully, this is a huge difference with the percentage of around 4.5% with which you took out the credit. Something to include in your decision making.
No costs for passive use
But there are also advantages with a revolving credit compared to other credits. This way you will only pay interest when you transfer money from the credit to your private account. As long as you do not do this, you do not pay interest. Another advantage is that you can withdraw repaid amounts once, so if a circumstance occurs where you need money quickly, you can immediately call the credit back.
The interest on a personal loan is slightly higher than with the above credit, namely around 4.7%. However, there are major differences that I will explain. With a personal loan you can pay for a large expense in one go. Think of a new television, a new car, a vacation, etc. With this form of credit you know where you stand from the beginning to the end.
Interest is always fixed
When requesting a quote you will receive a proposal with the percentage of interest that you have to pay. If you accept the quote, this interest will always be fixed, so you know exactly how much interest you have to pay during the entire term. Your repayment therefore consists of a part repayment and a part interest. The monthly installments ensure that you reach 0 at the end of the term.
Immediate costs when deposited
If you receive the amount of your personal loan on your account, you will start paying interest immediately from day 1. The money is deposited in its entirety and directly into your private account. You can then spend this at your own discretion, you no longer have to justify this. Once you have repaid the amounts you can no longer withdraw, if you still need additional money in an urgent case, you will have to take out a new loan.
Only suitable for borrowing a small amount up to around 1500 euros. It is not a traditional credit whereby the loan amount can be repaid over several years, but more an advance on your salary if you are short on the spot. The word ‘advance’ says it all, an advance must be returned quickly. In this case, depending on the amount you are going to borrow within a maximum of 62 days. To be used for paying overdue bills or for your daily maintenance.
The providers of the mini loan in the Netherlands all charge the maximum interest, or just below that. In addition, you also pay extra costs, this can be a guarantee for which you have to pay, or for extra services that are not included in the standard package. You can best use this type of loan if it really can’t be otherwise. It can offer a solution, but given the costs it does not seem wise to do this with great regularity. With the mini loan, no credit check check is carried out, this can be a solution for people who are not eligible for a regular loan.
The interest rate is low throughout Europe and this is also reflected in the loans granted in the Netherlands. The revolving credit and the personal loan certainly have a pleasantly low interest rate at the moment. On the other hand, there is the mini loan that continues to charge the maximum interest rate, so no benefit with a lower interest rate.