Choose the right loan form using our complete loan guide
There are several different types of loans and here we help you to find out what applies in the different forms. We help you choose the right form of loan when you want to borrow up to SEK 600,000 with no guarantee that you will not get unnecessarily high interest rates, long maturities or high debts.
See recommended uses and properties of the loans to get an idea of which loan is right for your needs. Then click on each form of loan to compare lenders and their interest rates, terms and costs.
We start with the most basic loan information. A loan is the amount of money you receive from the bank or another lender. This money will be repaid to the bank in the future.
So you only borrow the money for the moment. In order to lend money to you, the bank takes payment in the form of interest. Interest is a percentage of the loan that is added as an expense in addition to the money that you will pay back.
This is how a loan generally works. There are different types of loans that differ when it comes to how much money you can borrow, how long it is or how much it costs to borrow the money. We will explain everything in detail so that you are absolutely sure how everything with loans works.
You can apply for a loan from a lender. A lender can be either a bank or a credit company. As a rule, it is cheaper to borrow money directly from a bank, so they usually charge a lower interest rate for the loan.
However, banks also set higher requirements than smaller credit companies do. Review what financial conditions you have before you start applying for a loan. To find out your financial status you can easily do a so-called credit report on yourself.
The credit information can be made through the Information Center, UC AB. After you complete the credit report, you will know if you have a high or low credit rating. It is based on your credit rating that the lender then decides whether they can offer you a loan as well as what loan terms you can get.
What to keep in mind when applying for a loan is that you must meet certain basic requirements in order to get a loan. These requirements may vary from lender to lender, but they apply to virtually all players.
The minimum requirements are usually as follows:
- Be at least 18 years old
- Have a declared income
- Don’t have any payment notes
- Don’t have any debts with the Kronofogden
If you meet the points in the list above, you probably have good opportunities to be granted a loan. If you do not meet all the requirements but think you have the financial conditions to get a loan anyway, you can ask your bank to do a so-called manual check to see your actual financial status and not just go for the credit rating.
Creditworthiness is the same as your ability to pay off debt and is set based on several different parameters. The most important factors in assessing creditworthiness are your income, fixed expenses and current credits and loans.
In addition to the purely financial aspects, your living situation is also taken into account in the form of whether you live in a rental or tenancy right, where you live, your marital status and your family relationships. In other words, it is not entirely easy to clarify your credit rating without making a credit report.
Your credit rating is also, somewhat paradoxically, affected by how many times you have applied for a loan in the past. Every time you apply for a loan, a new credit report is made on you.
Many credit reports have a negative impact on your credit rating and therefore you should avoid it. This is also one of the reasons why it is important to know which actors to apply to when you are considering applying for a loan so that you do not run the risk of sending applications to lenders who might not grant you a loan .
How does a bank reason when you turn to them for a loan? Of course, it is difficult for a private person to know. The starting point from the bank is a very simple equation. They combine your total credit risk, ie your financial and social factors, with your ability to pay, which is made up of your income and expenses, to clarify your financial status. Then they make the decision whether they can grant you a loan as well as what interest you can get on the loan. In order to make the situation a little easier, we have compiled a summary of how the bank reasons and thinks on a case-by-case basis. In this way, we hope that you will gain a deeper understanding of how the process goes and what factors can influence the outcome.
Different customers – different conditions
- If the customer is young, single and has just got his first job, he is most likely to have a low credit rating. Although the person does not have any loans or credits before, he is not very high in the rate in the eyes of the banks. This is because, as we explained above, the banks consider so many other parameters besides a person’s purely financial status. The ability to pay is something that the banks focus a lot on. If you live yourself without having a permanent employment, the risk is high that you may find it difficult to pay off your loan.
- If the client is middle-aged, has a permanent employment for a long time and lives with his family in a purchased home, he is perceived as a very safe and secure customer in the eyes of the banks. In this case, the person is at a stage in life where there will probably not be any major changes that could affect his finances in a negative aspect. This will result in the person having good conditions for obtaining loans with favorable terms. If, on the other hand, it turns out that a lot of credit information has been made on the person in question, the bank may start to feel uneasy. Despite the high ability to pay, the bank may consider it too risky to lend to the customer.
- If the customer is a pensioner, it can be difficult for him / her to obtain a loan, even if the person in question lacks credit, loan and payment notes before. Although the person is considered to have a good financial history, the pension in Sweden is not very high. In this case, the low income limits the customer’s ability to pay, which leads to a low credit rating and significantly less opportunity to obtain loans on good terms.
Optimize your credit rating
In order to optimize your chances of getting the best credit rating possible, there are a few different factors that may be worth focusing on. Many things that affect your everyday economy can have a major impact on your credit rating.
First, you should always be careful about paying your invoices on time. It may sound unnecessary to take up such a thing, but if you avoid getting payment reminders and thus also avoid getting payment remarks at Kronofogden, then you have won a lot. Furthermore, it may be wise to review their credit and loans. Maybe you have several different credit cards or still pay for a subscription that you no longer use? To top it all off, you may have many loans spread out with several lenders. This is not an unusual situation, but it is far from optimal. If you recognize this, you should do something about it.
Having several unutilized credits, unused subscriptions and many scattered loans leads to higher credit usage than is really necessary. By researching your finances you can easily fix this. You need to minimize the number of credit cards to the minimum possible, end unused subscriptions and collect all loans from one and the same lender so you have taken a step in the right direction. This way you increase the chance of getting a higher credit rating while also saving lots of money each month.
If you want to collect as many different loan offers as possible from several different lenders, without risking more credit information being taken on you, it may be a good idea to contact a loan broker. A loan broker acts as an intermediary between you as a potential borrower and the lender itself. The borrower submits his application to the loan broker who makes a credit report. Note that only one credit report is made, even if the lender investigates your loan options at several banks and credit companies. This is undoubtedly the best way to find out which borrower can give you the best possible loan terms.
Now you know what the conditions are when you apply for a loan. However, as mentioned earlier in the text, there are several different types of loans, which are important to keep apart so that you get the solution that is best suited to you and your needs.
Different types of loans
The most common types of loans are private loans, mortgages and fast loans. The loan types differ from each other in several different ways, such as loans with UC and loans without UC, below we will elaborate on this a little further.
The fast loan is usually the most expensive loan form. A quick loan is a small loan taken to quickly cover up a cost. The loan is usually associated with a very high interest rate and a short maturity. In addition, in most cases, the interest rate is extremely high.
It is a very unfavorable form of loan when it comes to the cost of it, but it is also the form of loan that means that you get the money paid out by far the fastest. In other words, you should avoid taking a quick loan as much as possible. After all, if you decide to take a quick loan, it is of the utmost importance that you pay it back in time.
- Amount: 500 – 50 000 dollars
- Duration: 1 month – 5 years
Examples of applications
Car Repair | Dentist visit | Veterinary costs | Residual tax | Unexpectedly high bills
Part-payment of smaller cash purchases.
Private loans are loans that are taken out for private consumption and do not require collateral. It may be a loan you take to finance a renovation, a trip or similar. So you do not need to account for your purpose with the loan, but can use it for whatever you want.
The private loan can thus vary widely in terms of the amount and also maturity and interest rate. It is therefore difficult to say exactly what a private loan will cost you as a borrower. It is clear, however, that it is a very simple form of loan. Another term for private loans that you are most likely to come across is mortgage loans. A blank loan is therefore the same as a private loan.
- Amount: 2000 – 600 000 dollars
- Maturity: 1 – 15 years
Examples of applications
Vehicles (Does not require cash deposit)
Car | Boat | Motorhome | Caravan | Motorcycle | ATV | Moped | Bicycle | Driving license
Home and household
Renovation | Furniture | Appliances | Heating system | Extension | Electronics
Travel | Wedding
Home Purchase | ‘vehicle
Lowering loan costs
Collect small loans and credits into a single private loan to get a lower interest rate and monthly cost.
One last form of loan that may be worth mentioning is car loan. The car loan is a type of private loan but works in such a way that the car you take out loan to buy is taken out by the lender, just like the arrangement for a mortgage. This leads to a lower interest rate for the loan, but at the same time you cannot lend the entire car but only 80% of the total value.
You have to pay the remaining value in cash, just like the cash contribution in the case of a home purchase. If you are unable to pay the cash contribution of 20% of the value of the car, you can borrow the full amount through a private loan. However, the effect of this will be that the interest cost will be much higher compared to the car loan.
Amount: 10,000 – 500,000 dollars
Maturity: 1 – 12 years
Examples of applications
New car | Used car | Private or at car company
Mortgages are another form of loan and are taken at home purchases. Mortgages are often the largest loan you take as a private person. In general, the mortgage loan has a very long maturity and a relatively low interest rate. This is necessary for you as a borrower to have a real opportunity to repay the loan. The mortgage loan can cover 85% of the value of the home. The remaining part of the property value must be covered with a so-called cash contribution and is thus the part of the value of the property that you have to pay for with your own funds.
If you do not have sufficient cash for this, you have the opportunity to cover up the cash contribution with a private loan, which we explained above. When you take out a mortgage, the lender takes the home, which you borrow money to buy, as a security. The fact that the lender takes the mortgage as collateral for the loan means that the lender has the right to take over the housing in case it would be that you as the borrower are not able to repay the loan. This form of collateral also means that the lender’s risk of possibly not repaying its borrowed money is significantly reduced, which thus also renders in the low interest rate.
Amounts and maturities are stated by the respective bank and credit company in the form of a loan pledge.
Laws and regulations
First and foremost, it is worth noting the rules regarding the amortization requirement. The rules mean that private individuals who take out a new mortgage loan exceeding 4.5 times their own annual income are forced to repay an additional one per year. These are rules that apply in addition to the previously applicable requirements. The previous requirements stipulate that two percent should be amortized annually if the mortgage exceeds 70% of the market value of the home. If the loan is less than 70% but exceeds 50% of the property’s market value, it should be amortized by one percent annually. As a result, these provisions are important to take into account if you are about to take out a new mortgage to buy a home.
With regard to fast loans, the Act on certain business with consumer loans regulates how the market players may act. The Act stipulates what obligations the companies have regarding what information is to be submitted to the Swedish Financial Supervisory Authority for review. Thanks to the law, you as a customer can be sure that the company from which you take out loans is under the supervision of the Swedish Financial Supervisory Authority and that they check that the business is managed properly.
Thus, it is not said that any of the above options in our summary will suit you. If you do not feel that any of the options in our compilation are appealing to you, you may be looking for something other than a traditional loan. New services and products are constantly emerging as the financial market develops.
A classic form of credit is the credit card. The credit card allows you to dispose of funds that you do not currently own. Instead, the credit card serves as a way for you to borrow money for a short time and then repay it later.
Most often, the amount you bought on credit should be repaid approximately one month after the purchase. This type of credit is well suited for everyday consumption and should not be used as an alternative to larger loans.
Another type of loan that has appeared on the market in recent years is credit account. The credit account must not in any way be confused with the credit account in that it is two products that are very different from each other. Account credit is, in short, the same as the limit at which you are allowed to transfer your account until you can no longer use it.
The credit account, on the other hand, functions as a standing account from which you can withdraw and dispose of the money freely. The money you withdraw from your credit account must then be repaid. You also do not have to repay what you do not use from your credit account. In other words, the credit account is very similar to the credit card with the difference that you do not have a card linked to your credit account.
A third form of credit that has become increasingly common is so-called P2P loans. P2P loans, peer to peer or person-to-person loans, are a scheme that means that individuals borrow money between each other instead of through a lender.
Usually, there is an intermediary who controls the lending. This ensures that everything is implemented correctly, but it is the private individuals themselves who set the conditions for the loan.