Debts and loans

A loan is a good solution in many different life situations. Few people are able, for example, to purchase a home or set up a business without borrowing money. However, borrowing always entails a risk.

When considering taking out a loan, first do a bit of research and compare different loan offers to find one that suits you. Loan credit costs and repayment times and terms and conditions vary widely.

Loan credit costs mean the total future interest, fees and other charges the borrower has to pay for the credit. Besides the interest payable on a loan, you usually need to pay an arrangement fee and a monthly account management fee.

Use the annual percentage rate (APR) to compare different types of credit. APR is an indicator rather like the kilo price when buying vegetables. You can calculate the APR by calculating the credit costs for the amount of credit. Repayments have been taken into account in the amount of the credit.

By adding together the monthly loan repayments over the entire loan period, you can compare the final amount repayable with the amount of debt you have taken. The interest and credit costs on some loans may be even greater than the original amount borrowed.

The risk of borrowing is that you may be unable to make a repayment for one reason or another. In which case, you risk becoming over-indebted.

Published 31.12.2018