There are times in life when we have expenses, but don’t immediately have the money to pay for them. To buy a house, build or renovate it, for example. But also to buy a car or replace a defective boiler.
In this case, you can apply for a loan from banks and credit intermediaries. The lenders might be able to advance you the money you’re short. This money, you then pay it back in installments. In exchange for this loan, you must pay interest and fees.
There are different types of loans. If you are an individual, you will be offered a mortgage or consumer credit:
- A mortgage loan is an amount you borrow to buy a home, land, or to finance work on your home. Mortgage credit generally concerns a larger amount with a longer repayment period;
- you are planning to buy a car or a new television, you need to organize a wedding, you need to finance private needs? In this case, you can apply for consumer credit. Unlike a mortgage loan, the amount borrowed is often smaller and the repayment period shorter.
But do you really need a loan?
If you think you need a loan, you have to ask yourself one question first. Do I really need the loan? What are the possible alternatives?
If you dream of owning your own home, you will probably have to take out a 20- or 30-year loan for a large part of the price. This is the case for most new owners. Above all, it is important that you know in advance what you are getting into: evaluate how you and your family will manage the monthly repayment of this loan, as this repayment can be a very important part of your monthly budget.
Try to save as much as possible in advance. Because the more money you put aside to invest in your home, the better conditions you can get from the lender. The monthly payment will be lower and you will save on interest!
You may also be faced with other expenses for which you don’t have immediate cash, such as a new car or the wedding of one of your children. Here too, you can apply for a loan from a lender. But consumer credit is usually not free: you have to pay back not only the amount borrowed, but also the interest and fees. Think carefully before taking out a loan for such expenses. If you know, for example, that you will have to replace your car in three years, you have two options:
- in three years, you’ll take out a big loan and have to pay back a large sum every month;
- or you start putting a little money aside every month from now on. After three years, the money you save will be a great help when you buy your new car.
You can also prepare for unforeseen expenses, such as repairing a washing machine or car, by building up a savings reserve.