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Borrowing money through a so-called private loan or bank loan is often the only option when you need to borrow money and do not have any property that can be pledged for the loan. So you can use the money for whatever you want.

You can compare loans with good terms and without collateral

It’s easy to apply and get a Bank loan. All banks and lending institutions offer unsecured loans. In fact, mortgage loans are the most common type of loan in Sweden. To take out a loan, you only have to fulfill a small number of requirements.

First, one must not be too old. Normally, an upper age limit of 75 years applies. Since a loan is to be repaid over a minimum of one year, there is a risk that the lender will die before the loan is repaid in full.

Secondly, you normally do not have any payment notes to be approved as a borrower when it comes to bank loans. A payment note is, after all, a sign that you have previously had difficulties in fulfilling your payment obligations.

Third, one must be able to show what is usually called a “documented ability to pay”. In order to fulfill this condition, you need to have a fixed income of some kind, for example salary of employment or income from pension.

What are Bank loans?

For a car loan, home loan or boat loan, the lender’s security lies in the item you buy for the borrowed money. If you cannot repay the loan, the lender can simply take over the ownership of the house or vehicle and sell it at an executive auction.

Instead, for this type of loan, the borrower’s ongoing ability to pay is the lender’s security. This means that there is no property that the lender can sell to recover the cost of the loan.

This does not mean, however, that the bank loan is entirely without risks. Failure to pay your debts on time can lead to extremely harmful consequences

How high is the interest rate on bank loans?

The basic rule is that the greater the collateral you can provide for a loan, the lower the interest rate. For a unsecured loan, it is your own income that guarantees that the lender will get your money back.

Banks and lending institutions do not see this collateral as secure as a mortgage on a physical object, which is why the interest rate will be a little higher on a mortgage loan, for example on a mortgage loan.

The absolute highest interest rate can be paid on fast loans, which is also the smallest form of loans available. The reason why they become more expensive is because the maturity is so short. If fast loans would have as low interest rates as a mortgage loan, the credit companies would not make any money.

Since the maturity is as short as 1-3 months on a fast loan, the cost may not be so high anyway, but in percentage terms it will be very high.

Purpose of Bank loans

There are many uses for the loans in the Bank. The flexibility of the loan is one of its greatest strengths as you can use it to whatever you want. The question is just what you should use it for.

The absolute best purpose for a mortgage loan, or another loan for that matter, is as an investment. Investment does not mean borrowing to buy shares and funds. The return on these must then be extremely high to offset the interest you pay for the loan.

The kind of investments that blanc loans should be used for are things that give you direct or long-term value, or to offset a greater cost.

For example, a direct and long-term value is a home. By using your mortgage loan as the cash deposit, you receive a home that has its own value. Most often, the value of the home will go up or in the worst case, stand still.

This means you still have the money, they are just not liquid. So you can always get them back by selling the home.

Bank loans to offset a greater cost, for example, may be to use the loan to repair a water leak. A water leak can lead to water damage, which in turn leads to higher costs in the form of repairs and renovations.

It is therefore perfectly acceptable to take a Bank loan to repair the leak as early as possible to prevent major damage to the home. Another example could be obtaining a driver’s license or another education with his / her Bank loan. By educating yourself, you will have a greater opportunity to find a more high-paying job.

Low interest rate mortgage loans

We all want to get a low interest rate on our loans, which is actually the biggest cost when it comes to loans. Because the size of the loans is based on a subjective interpretation of the lenders using credit reporting agencies like UC, there are several simple methods you can use to lower your interest rate, no matter what loan you are looking for.

Collect your loans with a Bank loan

The bigger the loan you take, the lower the interest rate you usually get. This rule forms the basis for the concept of “collecting loans”. If you have a lot of less expensive loans, such as quick loans and sms loans, you can use a larger loan to collect them into a single loan with a lower interest rate.

Let’s say you have 10 loans of SEK 10,000 with 10% interest on each. By obtaining a loan of SEK 100,000 you can pay off your smaller loans.

Because you get better loans on loan loans relative to quick loans and sms loans, you usually get a lower interest rate. If you get a 6% interest rate loan, you save up to 4% per month just by collecting your loans.

High repayment capacity

First and foremost, the lender wants you to be able to pay off your debts on time. Both for their sake and for your sake. Your repayment ability is based on a variety of things that affect your finances and your disposable income, that is, the portion of your income you can spend on what you want.

The biggest factors in this are your income and your fixed expenses. But also things like marital status, children and how long you have worked and lived in the same place affect the lender’s interpretation of your repayment ability.

The best thing you can do to improve your ability to pay is simply to try to increase your income and lower your fixed expenses. This is easiest to do by making a budget and keeping track of their finances. It also helps if you live with a partner or equivalent and of course if you own your home.

Good credit rating

The other credit reporting company is looking at is your credit rating, ie how good you are at managing loans. If you often take out loans and you already have many loans taken out, it can be more difficult to take out a new loan.

The lender will note even if you do not pay your bills on time and become especially concerned if you have a payment note.

With such a note, it can be very difficult to get a loan with a low interest rate.

In order to maintain your creditworthiness, it is important that you pay your bills on time and make sure that you do not receive any debts from the kroner. As mentioned earlier, it is precisely in this way that you collect payment notes which are fatal to your credit rating.

It is also good if you try to repay your loans as soon as possible to get rid of your current loans.

Bank loan with co-applicant

Since two incomes are better than one, most lenders offer the opportunity to apply for a Bank loan with co-applicants. Applying for a loan with a co-applicant means that two people are under the loan and are both responsible for it.

For the lenders, this means that they dare to lend larger sums and with lower interest rates to the two individuals. Lenders are now looking at both of your economies and drawing a conclusion from both. If you both have a gross income of SEK 25,000 per month, the lender sees this as an individual with an income of SEK 50,000.

However, two people incur more expenses, which means that the parable is not completely accurate. But two people also increase the risk that one of you has, or receives, a payment note, which in turn reduces the possibility of a loan. It is therefore important that you not only have your finances under control, but also your co-applicants.

Loans without collateral – without consequences?

A Bank loan means that you have no collateral on the loan, such as mortgages and car loans. A person who is unable to pay his debts then risks getting rid of his home or his car for the lender to pay off the loan. In the same situation with a bank loan, the lender cannot do this.

But this does not mean that the loan is the same as a loan with no consequences.

If the loan cannot be repaid, the case can be transferred to the Crown Lender, who in turn can carry out a foreclosure. This means that the Crown Lender investigates what assets you have and how best to repay your creditors, that is, those you owe money to.

In order to repay your debts, the chancellor can then use a number of methods. Among other things, they may decide that you must give a certain portion of your salary until the debts are paid. Or they can use your current assets to sell and then give the profits to the creditors.

So, taking out a loan is not entirely without risks and consequences. You should therefore always be careful about how often and how large a loan you take. This is also why it is extremely important that you pay your bills on time and make sure to budget with debts, credits and other expenses in mind.

Borrowing money and lending money is an ancient phenomenon. However, something that has usually been associated with the lender being the one who made money financially on the loan.

In modern times, it has almost always been the case that only the banks were the ones who had the loan yield available. Today, it looks different with peer to peer loans.

Benefits for both parties

With today’s technology, investors of all levels can choose to invest in loans. This is simplified through so-called peer to peer loans. In short, this means removing the intermediary that usually existed earlier, ie the bank, by managing the loan process via a digital platform.

You as an investor can turn to one of the Swedish players for peer to peer loans and thereby invest in loans that give a better return on your investment. As a borrower, you usually receive lower interest rates than if you turned to a bank. In other words, a loan variant that both lenders and borrowers earn.

Largest in Sweden

If you want to invest in loans, there are several players in Sweden who provide this service. However, the largest player in the industry is Lendify, which is the market leader when it comes to peer to peer loans. Lendify is owned by well-known names that are part of the Lundin and Wallenberg families and founders of Avito.

Lendify was founded in 2014 in Stockholm. The business plan behind Lendify is to provide a service where investors and borrowers meet via a digital platform. Through this digital platform, the entire loan process is handled by Lendify, ie review of loan applications, drawing up agreements, the payment of loans and the entire administrative process involved in this. This is of course done with permission from Finansinspektionen.

Also worth noting is that you as an investor carry the credit risk as Lendify is not covered by the state deposit guarantee. However, the risk is very low and if you look at it from a historical point of view, the average of credit losses on loans to creditworthy persons on average is only about 1 percent.

How does it work?

As an investor you can choose to start an auto investment account with Lendify. This means that you invest in a number of different loans, and the risk spread is entirely managed by Lendify. Of course, you can also invest in a completely manual account and manage everything from risk diversification to choosing loans yourself, based on maturity and risk class. Lendify caters to both large and small investors and what sets these two apart at Lendify is the risk spread that depends on how much you choose to invest in loans.

When you then include expected credit losses and fees in the calculations, the annual return is between 2.5 percent and 8 percent. In other words, a very good investment if you have the opportunity to do this, as well as the opportunity to help other people who are in need of loans.

Read more about P2P loans here.

There are a wide range of reasons why you should have a loan that is interest free. Mainly it can be about saving money, rather than paying a high interest cost.

It may also have religious reasons. In Islam, there are rules regarding loans. So called “Riba” (ربا) . A believing Muslim therefore commits haram (an act that is forbidden) if he / she would not borrow money without interest. It is a rule directly derived from the Qur’an.

Muslims are only allowed to borrow interest-free

The word Riba comes from Arabic meaning “to increase” in Swedish. It is one of many rules that are taken directly from the Qur’an. The law is believed to exist for a believing Muslim not to lend money for his own gain.

I verses 3: 130, 30:39, the following excerpts from the Qur’an follow:

“Do not feed on usury that doubles and multiplies your profits”

Also from 2: 278-279 there is evidence that Riba is haram to the believer Muslim.

“Believer! Fear God and renounce outstanding usury if you are true. If you do not do this, you will know that you are at war with God (Allah) and His Messenger. “

Loans for Muslims in Sweden?

Many of the Muslims who live in Sweden today interpret the rule differently. The Muslims who have applied to Western economies are of the opinion that one should not do “usury”, but that “interest” is okay.

In other words, it is not so dangerous to borrow money without interest. However, you should not lend yourself money that is not interest free.

In Sweden, there are also examples of banks offering interest-free loans to Muslims. The expenses for borrowing instead become “service fees” or “administration costs”. In this way, many Muslims can see through their fingers and consider that they do not borrow money with interest.

You can find more about the rules of economics in Islam via the link.

Fast loans with no interest rate are okay?

As long as you do not borrow money with interest, it is okay for many Muslims in Western countries. This also applies to fast loans or SMS loans that are interest-free. Which we also suggest here on the website.

Even if you should borrow 1000 USD or if you are going to take a car loan then it does not matter. What lies at the center of whether it is haram or not is precisely the interest rate.

How do you avoid Riba & interest rates?

There are published tips for Muslims on how to best avoid Riba (hence haram).

• Borrow by family or friends in the first place. The bank should be seen as the last resort.
• Create a bank account that does not have interest (rib-free).
• Always pay bills and invoices on time. This is to avoid extra charges that can be considered useless.
• You should not enter into agreements that set interest-rate penalties for late payment, even if you plan to pay on time.
• Check if there are banks with interest-free loans directly in the account
• Rent a home if you cannot afford to buy a home without Riba.

When you buy capital goods, you can almost always split the payment over a longer period of time. It may be that you can split the payment for a washing machine, a TV or a computer over anything between a few months and several years. The offers are often marketed as interest-free. While this is normally correct, the installment is interest-free does not mean that it is free of charge.

Being able to buy capital goods with slightly larger price tags against installment can be an advantage, but it is important to pay attention to the conditions that apply. The alternative to installment purchases is to take out a loan. This is best done by taking a quick loan where a credit report is not made at UC. Here, however, we find out the most important thing you need to know about interest-free installment purchases.

 

It is important to take care of the repayments

If you pick up an offer on interest-free installment, you will not have to pay interest during the contract period. Credit rates on installment purchases are otherwise normally relatively high, so avoiding interest rates is of course advantageous. However, the benefit only applies if you manage the monthly repayments to the point.

Many installment purchases are made today through credit companies. Thus, when you buy the washing machine or TV set, you get a debt to the credit company, not to the merchant, and it is common for the credit companies to put up the debt as a current credit. Not infrequently, you can also connect to a credit card.

The fact that the installment purchase is a typical credit purchase can mean that you have the opportunity to pay off with smaller amounts each month. If you choose to take advantage of this opportunity, you will no longer receive the benefit of the installment purchase agreement running without interest.

Of course, also for installment purchases that are not linked to credit, you must pay on time. Delayed payment leads to reminders and the lender obviously has the entire battery of other recovery measures to take advantage of.

 

Charges of various kinds

Why is there the concept of interest-free installment purchases? The person who is responsible for the actual cost towards the merchant does not earn anything on the deal unless you pay no interest.

However, paying no interest does not mean that the installment purchase does not come with extra costs. You can always count on fees of various kinds.

Firstly, a setup fee is often charged to give you the benefit of being able to split the payment. This setup fee can be very modest, but normally it is at least 300 USD. Thus, a TV with the price tag $ 10,000 really costs $ 10,300.

Secondly, invoice and / or administration fees are rarely charged. This is about smaller amounts that are added to each monthly invoice. It can for example be about $ 30 or $ 40. Sometimes you may have the option of avoiding this charge altogether by using direct debit, but the most common is instead that you get a discount if you use direct debit.

In the example below, you can see how the charges affect the total cost and the effective interest rate. As you can see, the costs can go away. An alternative to installment purchases can be a regular private loan. See and compare private loans here.

 

Effective interest rate – an example

You have a new computer that costs $ 7495. You have not saved such an amount, which is why you would like to receive a payment offer. To your luck, you see that the merchant offers interest-free installment and that only charges are added.

The different fees for your credit purchase are two. First and foremost, you pay a setup fee of $ 695 and you must also pay an administrative fee of $ 39 per month. This gives a total cost of $ 9126 and an effective annual interest rate of 21.54%. The interest-free installment purchase is thus not immediately free.

There is a widespread notion that the cash contribution for a home, such as a villa or condominium, has to be paid for with its own money, ie money that you have not borrowed but saved yourself. There is no such requirement. You can very well borrow for cash .

Cash contribution and mortgage ceiling

According to the regulation on the so-called mortgage loan, a private person who buys a home cannot mortgage the home through mortgages to more than 85% of the purchase price / market value. The remaining part must be paid in cash in the form of a cash deposit. In other words, it is not possible to get a mortgage without cash.

Most major banks and lenders have further tightened this requirement on a voluntary basis. The majority of banks operating in mortgage lending operate with a limit of 75%. What this means is that if the purchase price for a home is $ 2 million, the mortgage loan for the home cannot exceed 1.5 million. The remaining $ 500,000 of the purchase price must be financed in other ways.

Although many banks have set 75% as the limit for the mortgage loan, they are no stranger to offering a private loan that covers the difference between 75-85% of the purchase price. Whether or not you can offer such a private loan, which in practice can be compared with previous days’ top loans, or not, of course, is determined by your finances and the circumstances.

With a good economy, however, there is every opportunity to finance the purchase price at 85% with the bottom loan and the top loan. Thus, how much cash you have to finance in other ways is 15%. Namely, one bank cannot grant you a loan to finance the entire home purchase to 100%. In other words, you must apply to another bank or lender to apply for a loan that covers the cash deposit.

Banks and lenders offering loans for cash

There are a large number of lenders that offer you to borrow money with really good terms for a cash deposit through a traditional private loan or a bank loan. The majority of lenders offer loans of up to $ 600,000.

Respective lenders have their own terms, but basically you have to be at least 20 years of age, have a fixed income and lack payment notes to be considered for a private loan. Borrowing money without UC is usually difficult when it comes to larger amounts.

Risks of borrowing for cash

All loans run at interest rates and the more unsecured a loan is, the higher the interest rate will be. The interest rate on a mortgage loan is relatively low, because the bank has a security in the home itself. If you cannot repay the loan, the lender has the right to take over the property.

The interest rate on a private loan that you take to cover the difference up to 85%, ie the so-called top loan, is tested individually based on your finances.

For this loan, there is no collateral in the home, but you can usually expect a small discount because you already have a commitment in the bank. This is especially true if you have your primary bank account there and if you have your savings collected with the same bank.

For the interest rate on a private loan that you take to pay the cash contribution, you cannot receive any discount. In addition, there is the risk that the lender attaches a great deal of weight to your general loan ratio and is therefore restrictive with lending or requires higher interest rates. This type of loan is thus more risky for the lender to grant and issue why the interest rate is thus higher.

A private loan must be repaid through a certain number of installments over a certain number of years. With a slightly higher interest rate, the costs can be significant every month. Then you should also fulfill your obligations to the bank that granted you a mortgage loan and possibly also a supplementary private loan. The more you borrow, the greater the cost.

Be sure to calculate the costs properly before applying for a loan to ensure that you can afford to pay both the mortgage and the private loans you take. If you want to borrow for cash, also make sure to carefully compare prices between lenders as there may be large differences between the players.

How does the new amortization requirement affect?

The repayment requirement means that if you have a mortgage that exceeds 4.5 times your own annual income, the borrower needs to repay 1 percent of the loan, which can be difficult if you already have a strained private economy. The change will, above all, hit hard on young people who are about to enter into their first home purchase in, or near, one of the major cities in the country where prices are highest.

Calculation example new amortization requirement:

If you earn $ 35,000 a month, want to buy a condominium for $ 3 million and have the opportunity to pay $ 500,000 in cash, you must, according to the new requirement, repay $ 6250 a month. According to previous regulations, the amortization requirement was $ 4170 per month. From the above example, the cost of housing over $ 2000 becomes more expensive per month compared to the old system.

In other words, borrowing for cash can be an expensive story, and there is of course a risk associated with such a procedure. If you apply to the metropolitan regions, however, it can be difficult to collect the cash contribution through your own cash funds and then a loan to the cash contribution can be a good idea.

Although it may seem expensive to borrow for a cash deposit, it may be a good idea to set it in relation to other alternatives. Renting a home is usually a ruinous business, as the monthly cost you put in renting will never be refunded. It may be a good option in the short term and it will give you a roof over your head, but in the long term, buying a home can be a smart option.

On the other hand, you can equate a home purchase with a long-term investment, just as you do in securities or in a savings account. When you sell the condominium you will hopefully get back more than what you gave for it when the purchase was made. This way you will make a profit on your purchase. So it does not work with a rental right.

Borrowing a cash deposit can in some ways even be positive for your personal cash flow. Since you, through a loan, do not have to pay the entire cash contribution with your own funds, your personal finances will also not be hit as hard at one and the same time, but instead the cost will hit your finances over a longer period.

Over time, it will of course be more expensive to borrow given the interest rate the lender charges for the loan, but it is also something that will not affect your finances directly. Taking a loan to get money for a cash deposit is expensive compared to paying cash, but the total cost will be spread over the period the loan runs. Upon contact with your lender, you will be able to get more specific details about how expensive the loan will be compared to paying the cash contribution with your own funds.

The loan market right now

We currently have a negative interest rate situation in Sweden. This means that it is relatively cheap to take out a loan. At present, our partner banks have interest rates for private loans, which is the loan you take to finance your cash contribution, which starts at around 3% and extends to a maximum of just over 30%. Where the interest rate eventually lands on your own account depends on several different things such as your credit rating and ability to pay in combination with how high the amount you borrow. Since the lender does not take any collateral in connection with the loan, the interest rate is instead set to a higher amount.

Calculation example:

Assume that you take out a loan for a cash contribution of $ 300,000 and that the effective interest rate is 6.11% and that the term is 7 years. This is a relatively common example and borrowing at a cash contribution of $ 300,000 is not at all unthinkable. The total cost of this loan would then amount to $ 367,532. If this is eliminated during the term of the loan, you will receive a total monthly cost of $ 4,375 where the interest cost itself is only about $ 804, which is not at all unreasonable in any way.

The difference between nominal and effective interest rates

When you are looking for the best loan terms, you will most likely encounter the notions of nominal interest rates and effective interest rates. These two can be difficult to know the exact difference if you are not fully familiar with how the loan market works. In broad terms, it can be said that the nominal interest rate is the base rate charged by the lender.

For almost all loans, however, there are additional fees, such as setup fees, management fees and so on. The cost of the loan after all the extra fees have been applied is called the effective interest rate. Thus, the effective interest rate is what you pay for your loan and thus the indication you should keep an eye on when comparing loans with each other.

Market players

We collaborate with some of the largest banks, credit institutions and loan intermediaries in the market. These include: Lendo, Consector, MyLoan, Bynk, Santander, Compricer and SEB, to name a few. Through these you can be assured of fast, safe and efficient handling.

You will receive personalized service and advice to find which loan arrangement is best suited for your goal according to your circumstances. If you also use prominent loan intermediaries, all you usually need is a credit report only to find out a large number of banks’ loan offers. If, on the other hand, you were to apply for loan offers from several separate banks on your own, this would mean that a separate credit report will be taken per application you make.

In the long run, this can result in a lowered credit rating, which in turn, ironically, makes it more difficult for you to get advantageous loan offers.

Summary

Although it may seem difficult to get the financing of their home together, there is every opportunity in the world to be able to buy your own home. A cash contribution for a dwelling of $ 2 million comes to $ 300,000. This is, as I said, the 15% that you cannot finance through the same bank that has already granted the mortgage of $ 1,700,000. Many people who have these $ 300,000 in their own cash funds usually choose to finance the cash contribution without loans. However, few have access to such large sums without lending.

The loan market has, of course, adapted to this need and many players offer private loans in order to cover the gap that arises between the mortgage and the total purchase price for the home. In other words, there are no reasons to worry about not being able to take a private loan for cash. The conditions for this loan are set according to your own financial situation.

If you have a fixed employment, high income and a low loan-to-value ratio before, combined with a register without payment remarks and a debt-free history at Kronofogden, you probably have good chances of being able to get a private loan for cash on very favorable terms.

When you are then considering researching the loan market to find the best terms for you, it is first and foremost to contact lender brokers. Loan brokers help you collect loan offers from several large banks. This is usually done by doing only one UC, ie a credit report. The fact that only one credit report is made does not affect your credit rating, which is very advantageous.

Finally, the conditions that you can be offered largely depend, or entirely, on the financial conditions you have yourself. Of course, it differs from lender to lender, but with a good personal finances you get a long way in the hunt for the best loan.