When we enter the working world, we start to understand how important money is, and how difficult it is to obtain certain things in life with sheer enthusiasm and motivation. It requires effort, and time to spend money on things we love or like, and at times, we might have to even plan things out, so we make sure everything works the way we want.
However, as we start to get financially stable, we start to develop what banking organizations call a financial history. This pretty much describes how responsible we are with our money, and this can open many doors to the financial world. And among the most useful benefits banks can provide, loans are the ones we can benefit from the most.
But what is a loan, and more specifically speaking, what is a consumer loan, and when should we rely on them?
In this article, we will cover the most important aspects of loans, some of the types you can find, when to get a consumer loan, and of course, the mindset you should have when getting any consumer loans.
First of All, Let’s Talk About Loans
Simply described, a loan is a process in which an individual or financial organization lends you money by receiving a payment that is done in different time frames, from weekly, to bi-weekly and monthly.
Usually, depending on the organization lending the money and also the terms of the procedure, we can have a certain amount of freedom in deciding how much time we can take to pay the loan, but it is up to the organization. Here’s the deal, though: the more time you spend paying it, the more money you will end up paying on most occasions.
So, it is a form of long-term investment organizations do to make sure that they are making a profit, even during a long period of time. This profit is known as a rate of interest, and it is, commonly, a set % of revenue based on the amount lent to the individual receiving the money.
So, for example, if you receive a loan of $10,000 that you need to pay over 2 years, you will normally have to pay around $417 per month. However, the rate of interest of the loan is around 10% of the total amount, so you would have to add $41.7 to the total monthly payment, so you would end up paying around $458 on a monthly basis, and $11,000 once you finish paying the total amount of the loan. That means that the organization ends up making a profit of $1,000.
Different Types of Loans
Of course, there are several different types of loans. The amount of credit you will receive as well as the terms of the contract are usually heavily influenced by the type of credit you will receive.
Each one has its own benefits and is commonly used for the sake of achieving a goal, but they also have their set of drawbacks as well as rules you need to follow.
Among the most popular ones, student loans, house mortgages, and car loans are the most commonly used all around the world. However, there’s a very specific type of credit that people can also benefit from: a consumer loan.
Consumer Loans
Also known as consumer credits, they are loans that are meant to fulfill a very specific purpose: the purchase, acquisition, or payout of a product or service. So, simply put, it is a loan that is used to purchase something or pay up for a service that is not necessarily something you absolutely need or require, but there are indeed certain exceptions to the rule.
Consumer credits are frequently used for very personal and worldly reasons, like the purchase of everyday amenities, and a very good example of a loan that enters this category is credit cards.
Credit cards can be used for a huge variety of things, from purchasing groceries to getting a new phone, a washing machine, or a T.V. They can also be used for special occasions, however, like purchasing tickets for a concert or paying up tickets for a planned vacation.
Of course, credit cards do have a limit in the amount of money you can spend singlehandedly, so there are times in which people prefer to rely on a loan provided by a financial organization, just for the sake of paying up the total amount of money required to purchase a product or pay up for a service or amenity.
When Consumer Loans Are Viable
A consumer loan is something that anyone can obtain, since it is mostly something that can be easily agreed upon, and most of the time, the amount of money requested by people is fairly obtainable.
However! There’s a rule you should absolutely follow if you don’t want to end up in a huge debt. And that is to make sure that you are capable of paying up the loan without too many difficulties.
Consumer credits are something you should only get because you want to benefit from a limited discount from a retail store or an event regarding huge discounts from a flying company. You know for sure that, with enough time or preparation, you could easily have paid up the money required for said discounts, but sadly, that was not the case. However, with your current financial situation, dealing with the loan is a piece of cake.
There are other occasions in which you might require credit, of course. An emergency happening, a car incident, a problem with your house, or just a needed expense overall. Still, if you follow the previous rule, you do not need to worry about it. There are websites that can help like forbrukslån.no where they provide a wide variety of plans you can benefit from, so you can find the one that fits your circumstances the most.
Remember: a general rule of thumb is that the more time you spend paying up a loan, the more money you will wind up paying. This can be perceived as a very big loss in the long-term, but for people, there are times in which paying up more money in the long-term just by having fewer expenses in the short term, is far more viable.
It is up to you to determine which plans are better for you. The best way to do this is by having a solid idea of your monthly expenses, and how much money you can relocate to pay up a loan without having to sacrifice too many aspects of your daily life.
