The full details you need about Loans in Europe 

Someone out there who has always thought of Europe as a land of milk and honey must be wondering where the talk of loans is heading. You know loans for a long time have been misjudged as traps and awful avenues for wrecking prospects of people’s lives. It could be  a mistake to believe that because Europe is largely successful, the need for loans shouldn’t feature anywhere. Just like already stated, such a line of thinking would be erroneous to the extent that it paints loans as only intended for the poor. 

For anyone wondering why a blog would be dedicated to details on loan in a continent largely perceived as rich and prosperous, this is for you. Just check around any multinational company started in Europe or better still, those sleek cars that the Europeans spin around could be on loan. Honestly, loans in Europe are the foundation on which entrepreneurial people build their fortunes. 

Even at a personal budget level in Europe, loans come in handy to plug in a shortage in the budget and save unnecessary headaches. People in Europe take loans for various reasons every other day but this doesn’t mean they are poor; of course most of them are well above the dollar poverty line. In most cases. There should be no stigmatization about taking a loan in Norway for neither will you be the first nor last. 

Initial impression of and facts about Europe for those planning to move

Europe remains a key destination for those looking to have an international experience in work, study, research, culture and more. The continent prides itself on having some of the oldest civilisations dating centuries back. Its success stories around economy, political stability, innovation and civilization have become so attractive. Today, expats fall on each other in a near haste to find something to do in Europe.

Stories are written about the many people drowning in the Mediterranean in their perilous attempts of crossing over to Europe in search of greener pastures. So to many, Europe is the alpha and omega. This may tell why mentioning Europe and loans in a single sentence may startle someone at the verge of moving over. 

Whereas most people shy away from directly discussing the financial woes that may come when living in Europe, the reality is that proper planning of income isn’t negotiable. Perhaps out there you may have a feeling that simply moving to Europe and working a few hours will guarantee enough income to take care of everything and still manage to save.

The stark reality is that people living in  Europe literally work their asses off to afford their lifestyle. In the unfortunate event that an emergency or unplanned for  high cost spending comes beckoning, the default is to borrow money. Some borrow from friends but this can only be once in a while. Those who have already lived in Europe long enough to pick cues know too well that approaching regulated and known financial institutions is a better choice than friends or relatives. 

Loans are a part in Living a decent lifestyle in Europe 

Europe with its bustly cities, comparatively high cost of living and so much inclinations towards being trendy can easily push someone to a brink. This is so real, especially for those living with teenagers and children who will never give a damn to the fact that you may not be having enough money to buy them an iPhone, iPad, Nike Air…name all those niceties that kids consider classy. All this budget then compounds an already overwhelmed income which goes to bills and sustenance. It would be naïve to comfort anyone that income alone will always sort out all the private  needs in Europe. 

Maybe it’s beginning to get murkier for an ambitious reader already planning to move over to Europe. The burdens already seem insurmountable and the reason for taking that leap of hope may be thinning out . Right? Not anymore. There is always some good news about Europe.

The good news is that whatever your financial situations and needs, Europe has many financial institutions that offer various services including loans. Be it a mortgage, credit card or personal loan, you will find it here. Loans can go a long way when it comes to saving a person from a tricky situation. However, I prefer to view loans as a vehicle for improving one’s financial situation. 

The effect of taking a loan  in Europe will depend on how it’s used

The difference on whether a loan taken in Europe will help you or worsen your financial status depends on how you use it. Therefore, it would make much sense to evaluate your reasons for needing a loan and the lenders available in Europe. This will ensure that you go only for the most innovative products. 

The good news is that Europe’s banking sector is much more liberalized. All the countries in this continent are focused on providing the most innovative products when it comes to loans. The high level of competition has made it compulsory for them to prioritize customer needs. This is why this blog is dedicated to evaluating the loan environment in Europe. 

Borrowing Money in Europe

Loans and finances are among the most dreaded topics for most people. Borrowing in particular, sends many of us running towards the opposite direction. However, the pleasant surprise is that a loan can come through for you in some of the lowest moments. Similarly, a loan will be good or bad in the long run depending on how you use it. The trick is to be smart and careful when borrowing. 

Remember that by borrowing money in Europe, you could get that new home you have been dreaming of. It can also cover your educational needs by paying for college tuition. Given that Europe has some of the best education systems in the world, this might come in handy. Finally, loans can be a great way of getting revenue to start a new business.

 

One thing you will love about Europe’s financial system is that you have a wide variety of lending options. This range from traditional financial institutions, like banks, credit unions, and financing companies to peer-to-peer lending (P2P) or a loan from a 401(k) plan. Let’s look at an overview of some of these options. However, for more detailed information, keep to the articles on this blog. 

Bank Lenders in Europe

Banks serve as the primary focus for most people when it comes to money matters. This is not surprising given that they are a classical source of money. Thus, if you are looking to borrow money in Europe, this would be a good place to start. Most banks in Europe are dedicated to serving the needs of their customers through innovative products. You can for example get a car loan (check https://søkbillån.com for Norwegian car loans) that is cheaper than your regular consumer loan.

Thus, you will find access to several loan products such as mortgage, personal loans, auto loans, and construction loans. Some banks will also allow you to refinance existing debts at fairly more favorable rates. However, the terms and conditions will differ from one institution to another. But, you can bet that with the advanced financial system in Europe, the terms will be very favorable. 

However, it’s important to note that loans charge higher interest rates for loans they offer. This is different from the lower rates they charge for deposited funds they take in. Remember that banking is a business and thus they have to make profits too. This is how they make money from their services. 

Similarly, most banks in Europe often have high costs linked to loan applications or servicing fees. It also implies that there are fees, and interest rates involved in reselling loans to other banks or financing companies. One thing you might find frustrating about the European banking system is that processes may change, most times with little notice. 

Advantages of borrowing from a Bank in Europe

The best thing about borrowing from banks as opposed to other lenders is their reputation. Thus, it is easier and more rewarding to get a consumer loan from them. Besides, you will have access to customer service. So, you can ask for clarification and seek answers whenever the need arises. The fact that you have a relationship with the bank will also make the application simpler. 

Disadvantages of borrowing from a Bank 

However, there are also disadvantages that come from borrowing from banks in Europe. For starters, some banks might decide to resell your loan to another lender. This can be bad especially if the terms are less favorable. You might also end up spending a lot of money for loan applications or servicing. 

Borrowing from a bank can also be tricky if you are borrowing from a bank outside your country. Most banks are reluctant to offer loans to citizens from a different country from where they operate. 

Credit Unions in Europe

Another option for borrowing in Europe is from a credit union. Credit unions are cooperative institutions. They are owned, controlled and managed by the members from a distinct group, organization or community.  One thing you will notice about these unions is that their services are almost similar to banks. However, the services are only limited to the members. 

One thing you will love about them is the interest rate. They have favourable rates because they are non-profit enterprises. Similarly, you will pay less fees when it comes to loan applications and other loan elements. Some even do it for free if you are lucky enough so be on the lookout. 

While membership was previously extended only to individuals with a mutual goal, it isn’t the case today. They were also more common among employees from the same company, same community, association or labor union. 

Borrowing From a Credit Union

There are many advantages to borrowing money from a credit union instead of commercial banks. For one, you will incur lesser charges thanks to them being non-profit organizations. Similarly, you will have more favorable terms when it comes to interest rates and fees. However, credit unions are different, so it pays to find out about a union before joining and borrowing. 

The disadvantage of this however, is that they might not have much to offer in terms of loans. Remember that regular banks develop a range of innovative loan products to outdo their competition. This is not the case with credit unions. Similarly, unlike regular banks, credit unions have membership requirements in order to apply.

Peer-to-Peer Lending (P2P) 

This form of lending has become more popular worldwide thanks to technological advancement. It is also known as crowd lending. It allows people to borrow and lend each other money directly. So, you will be borrowing from an individual investor at pre-set terms and conditions. 

The terms include interest rates and repayment period and it’s usually through a peer-to-peer online platform. However, before offering you a loan, the investor will evaluate your creditworthiness. This will determine whether or not they agree to offer you the loan or how much they offer. 

So, whether or not you receive the full amount or only a portion of a loan, will depend on your credit rating. Some platforms let you borrow from more than one investor. This is a good place to borrow if you cannot get a loan from another institution. It can also be a source of income if you are a lender through interests. 

Advantages of Peer-to-Peer Borrowing 

The major advantage of these platforms is that they also accommodate those who don’t qualify for other loans. For instance, most lenders in Europe need a permanent residency to offer loans. This can be challenging for foreigners who have just arrived and are in dire need of a loan. Similarly, some have slightly lower interest rates than other lenders so you might access favourable terms. 

However, like any other lenders there are disadvantages of borrowing from these platforms. A good example could be the complicated fee structures. Not all borrowers will understand the terms. This can be very challenging especially if you need the money urgently. Besides, you might end up owing more than one lender. Furthermore, it doesn’t allow you to consolidate debts so you might be stuck with unfavourable terms. 

401(k) Plans 

Another form of borrowing in Europe is through 401(k) plans. They work the same as workplace-based retirement accounts such as 403(b) or 457 plan. These plans allow workers to take 401(k) loans. With them, you can get a loan of up to 50% of funds vested in an account. However, the amount has a limit of $50,000, and only lasts five years. 

Even though you end up paying an interest plus the principal, you won’t pay any taxes. This is because you get to borrow the money and don’t withdraw. On the bright side, the interest is repaid to you and not the lender. 

You should remember that there are taxes and penalties that come with failure to pay the loan. For instance, if you completely withdraw from the scheme, you will pay taxes and a 10% penalty if under 59.5 years old. So, it’s wise to continue the payments until you have repaid the full amount. Otherwise, the loan will only end up making your financial situation worse. However, the conditions will differ from country to country though the concept is the same. 

Borrowing from a 401(k) Plan

One advantage of borrowing from these plans is that you don’t incur any application or underwriting fees. Similarly, it’s almost like a loan to yourself so the interest will revert back to your account. I think it is a smart way of borrowing if you don’t want the hassle of regular loans. 

You might find the tax implications that it comes with very frustrating if you are used to borrowing from regular lenders. It also means that you have to be careful with the amount you borrow. In most cases, if not all, you get a lower amount than what you borrowed. You might also end up borrowing more than you intended. 

Credit Cards 

Card payments are becoming increasingly common in Europe. More businesses are allowing their customers to pay through credit cards. Credit card payments are considered more secure and convenient if done appropriately. However, you should always remember that it is also a form of borrowing. 

Your credit card provider will pay for your purchases so in a way, they are extending a loan to you. Similarly, you can get a cash advance from your credit card by using it to withdraw cash. This is then added at the end of the month and you receive a bill from your provider. 

Most providers will not charge an application fee for a cash advance on a credit card.  And what’s more, you don’t pay any interest as long as you repay your balance in full at the end of the month. The challenge comes when and if you carry a balance forward. 

Most providers will charge exorbitant interest rate charges, going up to 20% per annum. Your credit card might also not come in handy for large purchases. The providers mostly offer a low credit limit per month. However, the limit might save you from overspending and getting stuck with unpaid debts. 

Borrowing through Credit Cards

The advantage of borrowing through credit cards is that they are safe and convenient to carry around. Also, their popularity in Europe makes them an effective payment method especially when traveling. The lack of application fees and interest are also added bonuses. Besides, you will have access to many providers in Europe. 

However, they can lead to debts and more debts. The abnormal interest rates that credit card companies charge for balances that are brought forward is alarming. So, it’s never a great idea to only repay part of your credit card bills. Finally, they can affect your credit score considerably. 

In Europe, a good credit score will open doors for you. They can affect your ability to secure an employment opportunity. They can also prevent other lenders from giving you loans. Lenders always want to be sure that you are responsible enough to repay your debts so they will check your credit score. 

Tips on Borrowing Money in Europe 

Before borrowing money, it’s important to know a thing or two about how loans work in Europe. This is why this blog is committed to assessing the loan environment in Europe. By reading each article, you can get all the information you need to make a more informed decision when asking for a loan. 

1. Interest Rate  

Knowing the interest rates and charges that come with a loan is important because it will help in saving costs. This means that before you take a loan in Europe, you should shop around and consider your options. Different lenders will charge various rates on the same loan so it’s worth researching. 

The interest rate will also determine whether or not the money you borrow helps to meet your long-term goal. For instance, imagine taking a mortgage at a steep interest that might finally lead to the loss of the house. Only borrow what you can pay back. 

2. Repayment Terms 

Taking a loan is a huge decision that will affect your life and finances for a period of time. Thus, it’s important to understand the repayment terms and how long it will take you to repay your loan. Some lenders will allow you to repay your loan earlier than agreed so you should find out what it entails. 

Understanding these terms will also ensure that you identify any other rules attributed to repaying your loan. Remember that the repayment period also determines what you pay back so you should weigh your options carefully. Repaying your loans on time will help you build a good credit history. 

3. Charges 

You should find out if your lender charges other fees before and after processing your loan. Sometimes you might end up paying fees that ultimately affect the amount you receive. Some lenders will charge origination fees, application fees, or late fees. Therefore, be on the lookout. You should also read the terms and conditions carefully to avoid any hidden charges. This is especially true if the contract is not in a language you understand. 

Never sign a contract that you have not fully understood. Sometimes, the urgency and rush to have the money might cloud your judgment when it comes to understanding the terms and conditions. This is a common problem but you should always remember that you are the one who will pay the price. So, take your time and go through each item in the contract and seek clarification where you need it. Fees may be charged in addition to the interest rate

4. The type of Loan 

Lenders in Europe offer both secured and unsecured loans. Secured loans include a collateral whereas unsecured loans do not. This means that if you fail to repay a secured loan the collateral is taken away. For instance, failure to repay a mortgage loan can lead to the foreclosure of the house. You should always ask your lender to clarify whether a loan is secured or not.