A loan or credit is a financial instrument that allows you to borrow a certain sum so that you can finance a project. Taking out a loan also means that the entire amount must be repaid within an agreed period, including an interest rate. In other words, a loan is a consumer credit that results from an agreement between a borrower and a bank, financial institution or other party, whereby the loan amount and the repayment terms are agreed.
Taking out a credit means that a credit specialist, such as a bank or financial institution, lends you a certain amount of money for the purchase of a certain good or service. If your credit application is accepted, you must repay it on fixed monthly due dates. Every month you therefore repay a fixed part of the capital with interest. The interest is fixed at the start of the loan and does not normally vary over time.
There are different loans that focus on different needs. Do you want to pay for a specific purchase or service? Think of a car or a motorcycle or a renovation of your house; this is referred to as a loan with or for a specific purpose. However, if the loan contract is concluded without specific reasons, this is referred to as a personal loan. Always choose a loan that is suitable for the purpose that you have in mind and remember that a loan always entails additional costs.
How does OneTopNotch loan simulation work?
Via the orange button at the top of this page you will be taken to our online loan simulator. There you can quickly and quickly perform a loan simulation of your choice. The loan simulation offers you various options, such as increasing or decreasing the borrowed sum, indicating the desired duration, selecting the banks that you want to include in the simulation, and the results are immediately shown in the table. In this table you will find the monthly repayments and the total amount of the loan. You can usually view the detailed loan repayment plan on the bank’s website itself.
What is a loan for a specific purpose?
The loan with or for a specific purpose is a consumer credit that is taken out with a financial institution that makes it possible, as the name suggests, to finance a specific purpose. This can be a purchase of a certain good but it is also possible to finance a certain service with it. Borrowing money through this loan does require that you have invoices or order forms for the good or service in order to justify the expenses. The loan can be taken out at the place of sale or at the bank. Please note: even though the loan is offered by a supplier, it is and remains the bank that manages this loan.
The loan for or for a specific purpose is a guaranteed loan because the borrower must provide certain properties as a guarantee. In general, the value of this property is approximately the same as the value of the loan. Suppose you take out a car loan, then your car serves as a guarantee. If you do not repay your loans, the bank can claim this guarantee and thus confiscate the car. Due to this guarantee, loans with or for a specific purpose are considered by the banks to be low-risk loans. The interest on this loan is therefore often somewhat lower than that of, for example, a personal loan.
What is a personal loan?
A personal credit is also called an installment loan or loan for all purposes. This loan does not have to be intended for a specific purpose and can therefore be used for all kinds of purposes. You do not have to justify the purchases via order forms or invoices. For this reason, banks regard the loan as being more risky, which means that the interest will be higher than with another type of loan.
Personal loans usually also have to be repaid over a shorter term than loans with or for a specific purpose. A loan with or for a specific purpose can have a term of thirty or thirty years, whereas for ordinary loans this can often only be 120 months. If you want to know the exact maximum term of each loan, you can do so via the loan simulator at the top of this page.
As mentioned, this loan allows you to finance a whole range of things; a holiday abroad, a wedding, a new laptop or the refurbishment of your apartment. Note that the majority of banks also give a commercial name to this type of loan; such as wedding loan, renovation loan or holiday loan These loans, however, all have the same effect.
The table below shows the differences between personal loans and loans for or for a specific purpose.
- Student loans: this allows you to finance all matters related to the study, such as tuition fees, the rent of a room or a laptop. Reimbursement can be immediate or delayed.
- Holiday loans: with this you can pay the costs for your holiday. Think of the flight or staying in a hotel.
- Decoration loans: you can take out this for the decoration of your home, not to be confused with the renovation loan. This therefore concerns, for example, the furniture. Small loans: this allows you to finance the purchase of new digital devices such as a laptop, television or home cinema set. In this way you turn to the bank instead of a dealer, saving you costs for the intermediary.
- Debt consolidation loans: allows you to combine various loans. Instead of multiple loans, you pay off one loan on the basis of one fixed monthly repayment during a certain term.
Loans with or for a specific purpose
- Car loans: allows you to pay for a new or used car. You must be able to prove that the loan is actually used for this purpose. Your car serves as a guarantee so that the bank is insured if you do not pay off your car loan.
- Motor loans: these allow you to finance a motorbike, quad, moped or scooter. They work on the same principle as a car loan.
- Mobile home or caravan loans: with this you can finance your new mobile home, caravan or mobile home. This also works like the car loan.
- Mortgage loan: with a mortgage loan you can finance the purchase of a home, but you can also pay for the construction or renovation of a property. Your home serves as collateral for this type of loan.
- Renovation loans: with this you can pay for the renovation of your house or apartment. After you have quotes for the renovations, you can submit a request for a renovation loan to the bank for an amount equal to these quotes.
- Energy loans: these loans are also called green loans and are used to finance energy-saving renovations to your home.
I want to apply for a loan, but I don’t know if I can repay it. What should I do?
Before comparing all possible loans, you should first answer a crucial question: how will I repay the loan? Obviously, applying for a loan is not a good idea if you do not know whether you can repay the loan amount and all related costs.
It is impossible to know exactly how you will be financially in five or ten years, but it helps to ask yourself the following questions:
- Am I planning to make a major purchase (for example, a car or house)?
- Do I have a permanent contract in the future? Shall I change jobs?
- Will I have to deal with new costs that I do not (yet) have at the moment (for example the birth of a child)?
If you cannot answer these questions with certainty, you will in any case better understand how you are doing financially. So be aware of the danger that hasty decisions may have on your future.
A loan is a financial product that is adapted to the needs of the borrower. The duration plays a major role in this, since this influences the interest rate and the monthly repayment. The APR, or the annual percentage rate of charge, consists of the interest rate and all other costs that are charged by the financial institution. The higher the APR, the more expensive the total repayment will be. Remember that a percentage of more than 6% has a good chance of leading to a negative debt spiral.
Bad debts are debts for which you take out a loan without actually benefiting from the loan. It is therefore about unnecessary purchases that are unnecessary and expensive in the long term. This type of debt is often the cause of an excessive debt burden and can lead to a permanent impoverishment. It is therefore advisable to think carefully before you take out a loan
How can I apply for a loan?
After completing the loan simulation, you have been able to compare loans and you have an idea of the best form of credit for your personal situation. Do you subsequently want to apply for an online loan? You can do this by clicking from the simulation to the website of the bank in question. After completing the required information, the financial institution will analyze your application and decide whether you meet the conditions for borrowing. To apply for a loan you must:
- Be at least 18 years old;
- Have a domicile in Belgium;
- Have a fixed income;
- Do not appear on the blacklist of the Central Individual Credit Register.
However, taking out a loan requires more than just meeting the minimum requirements of the bank: a minimum monthly income of the borrower is also required, the number of dependent children is taken into consideration and the financial situation of your partner is assessed Your credit history will also influence how much money you can borrow. You will not find these conditions in the loan simulation, but you can discuss it with your bank adviser.