Borrow money for buying a car
You want to buy a car or renovate your house, but you do not have the required money in the bank account. To still be able to make the purchase, you can consider taking out a personal loan. Certainly if you know exactly how much you need. The lender deposits the money in your account and you pay off a pre-agreed part of it every month.
The term of the loan has also been determined earlier. All very clear so. You know exactly where you stand and that creates clarity. You pay interest every month and part of the loan repayment. The interest rate does not change during the term. The amount you pay is therefore the same every month. If you want to take out a personal loan, check carefully whether you can pay the costs of the loan. Also pay attention to the total costs, not just the monthly costs. Most lenders offer calculation tools that you can use to calculate yourself.
Duration of the loan
How much interest you pay depends not only on the amount that you borrow, but also on the term of the loan. Generally, installments of one to ten years are used, but loans of twelve or fifteen years are also possible. Which loan period you choose will also depend on the purpose for which you are borrowing. If you want to buy that car and drive it for 6 years, then it might be wiser to choose a shorter duration. Nothing is more annoying than having to pay for something that you no longer have.
Your personal situation also plays an important role. If you opt for a higher monthly amount, your loan will be paid off earlier. With a lower monthly amount, the total costs of the loan increase, because you do pay a lower amount each month, but also interest over a longer period. Many providers use a calculation tool to see if you can still make ends meet after the monthly costs have been paid.
Pay off without penalty
You have a month left and you want to pay off extra on your loan. Some personal loans can be repaid without penalty. But beware, because not every provider gives this option. After all, this means that it loses interest income. If you think you want to pay off in the interim, then pay attention to whether the personal loan you choose offers this option.
Repayment part becomes larger, interest part smaller
The provider determines the amount that you must pay each month. That has been agreed in advance. The amount that you pay to the lender remains the same throughout the term of the loan. The monthly amount to be paid partly consists of repayment and the other part of interest. You pay interest on the part of the loan that you still have to pay off. So as you already pay longer, the part that you have repaid will become larger and the part that you pay in interest on the remaining loan will become smaller and smaller.