With a loan, you as a consumer can maintain or expand your financial scope in different life situations. Due to the wide range of possible uses, a loan can be used, for example, to finance your own home, purchase a car or finance a trip around the world. In most cases, loans are about larger purchases and long-term financial planning.
What exactly is a loan?
The loan is a sub-form of credit, the main handle for financial loans. The way loans and loans work is therefore similar. In both cases, the point is to borrow capital from a bank or other institution. The main difference between a loan and a loan is the scope.
Loans are borrowed funds that have a larger volume and are usually lent over the long term. The lender therefore undertakes to provide a fixed loan amount for an agreed period. In return, the borrower undertakes to repay the capital received with additional interest over a predetermined period. In principle, a loan contract does not have to be concluded in writing. However, it is clearly advisable to conclude a written contract.
Who can apply for a loan?
Since a loan is usually a very large amount, the security of all transactions is very important for both parties. For this reason, you can usually only apply for a loan as an adult. Exceptions are only possible in special cases. However, the legal representatives of a minor and a court must agree to this.
In addition to age, there is another, much more significant hurdle when applying for a loan. Lenders – and especially the banks – can usually be given collateral for the loan. This security protects the bank from the failure of lender payments. In addition, the borrower’s creditworthiness, ie the ability to pay interest and principal, is carefully checked. Therefore, when it comes to lending, the following often applies: “Only those who have will be given”.
What should you watch out for in personal loans?
If you want to get a loan with less formal hurdles, you can take out a so-called private loan. This involves lending money between individuals without involving a bank or other financial institution. Fast money: In most cases, a personal loan comes into question when unforeseen events occur and you need money quickly. A broken car and household appliance, but also an urgent need for renovation of the house after a storm are examples where money is needed.
Uncomplicated financing: The use of a personal loan can also be attractive if you already have a larger loan with your house bank and the leeway there is exhausted within the scope of your collateral. Since the personal loan is usually given between relatives, friends and acquaintances, trust is greater and there is no need for collateral. In addition, the personal loan is usually more flexible and quicker to use.
Do not do without a loan contract
The most important basic rule, however, is to always draw up a loan contract. Even if you conclude the contract with closest relatives and friends, friendship and family ties should be maintained in case of doubt. It is therefore all the most important to agree the loan in a binding and detailed manner by contract. In some cases, when the contract is formulated, it turns out that the personal loan would put too much strain on the relationship, so that you can still do without it. Nevertheless, the private loan is one of the most popular and simplest forms of loan. On the Internet you can find a large number of contract templates that can be used without having to consult a lawyer.
Our tip: In the loan contract for the personal loan, you should specify the exact interest rate in addition to the loan amount, the term and the divisional methods. However, this should be appropriate and customary in the market to avoid conflicts and tax problems. If an interest rate is too high, it can even be rejected by a court because of immorality.
Broker platforms in demand
In addition to direct personal loans between relatives, friends or acquaintances, you can also use brokerage platforms for private loans on the Internet. Such platforms mediate people who want to lend to those who need more financial leeway. However, the offers of these platforms should be checked and compared very carefully, since collateral and information about the contractual partners are limited.
Granting a loan yourself: If you want to grant a loan, you should note that despite a loan contract, in the worst case you will not get your money back or only get part of it. If your borrower no longer has the financial means to repay the amount, in the worst case you will even have to write off the loan claim on a personal loan entirely.
Conclusion on the subject of loans
A loan from a bank or as a private loan offers advantages that should be used especially if you want to make a long-term investment – for example to buy a property. Due to the long term of the contract, one can generally expect lower interest rates than with a “normal” loan. In some cases, a private loan can even be approved free of charge and without collateral, which should save you some money and time.