With a loan, someone provides you with a certain amount of money for a predefined period of time, which you then pay back in monthly installments or on a specific date.
When do we speak of a loan?
An Credit is a certain sum of money provided by a person, company or bank for a certain period of time. This is subsequently repaid in monthly instalments or on a specific date. In the private sector, credit is used to finance goods and services; in the commercial sector, it is used to finance investments.
In order to obtain a loan, you must be of legal age, be employed and/or have sufficient income. In addition, you must have a sufficient creditworthiness, also called "credit rating". This is determined by the amount of your income minus certain expenses and other credit obligations. Furthermore, depending on the type of credit, the data from various information centres are also queried as part of the creditworthiness check. This shows whether and in what amount other loans exist and whether these are repaid correctly.
Types of credit and credit?
There are different types of credit, which differ mainly according to their purpose, such as:
- Consumer credit, also called "personal loan", which is used for financing private purposes, such as furniture or cars. For this type of loan, no intended use has to be specified when applying and the loan is usually repaid in monthly instalments.
- Mortgage loan:. This is an earmarked loan that can be used to build or buy a new house, condominium, etc., but also for renovation purposes. Here you need to prove the use of the money (bills, purchase).
What should be considered when granting a loan?
When you take out a loan, you are making a medium to longer-term financial commitment. When taking out a loan, make sure that your household budget does not deteriorate during the term.
In certain situations, it may be useful to use credit services, in particular when
- you are planning a major purchase that you cannot finance entirely from your own funds.
However, the cheapest way is for your relatives or someone from your circle of friends to help you out. In the following case, it is certainly not advisable to take out a consumer loan.
- If it becomes apparent today that your budget will deteriorate during the term of the loan - for example, because a child will be born or because you will retire.
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