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The difference between mortgages and consumer loans

The common denominator for quick loans, SMS loans and quick loans is that the loan amounts are rarely more than SEK 15,000 and that the annual percentage rate (APR) on the loans is often very high compared to larger consumer loans.

Mortgages, SMS loans and quick loans give their name an incorrect picture of the fact that you as a borrower will receive the money very quickly, and that you almost only have to send an SMS before they are on the account. Many, however, are surprised that the names do not relate to how quickly the money is on your account, but instead that the maturity of the loan is short – typically less than 3 months.

Personal Payday loans

Personal Payday loans

This type of loan product is known from, among other things, England and the United States, where they are called the “payday” loan. They are, to a large extent, used to cover a deficit in the account at the end of the month until there is “payday” where you typically pay the loan back.

Personal Payday loans or quick loans, SMS loans and quick loans as they are called in Denmark thus mainly comprise loan products, which are small amounts that are repaid over a shorter period. The correct and more legal name is “short-term loans”.

“However, many are surprised that the names do not relate to how quickly the money is on your account

Unsecured loan

Unsecured loan

Common to these short-term loans is that they are all unsecured. This means that the lender does not get the assurance that the borrower will repay the loan by getting a mortgage on eg the loan. a car or a home. This means that in addition to their maturity and amount, they do not differ from other loan products, such as consumer loans, which are also unsecured loans, but with a longer maturity.

Pay attention to the ÅOP

The APR describes how much of the loan you have to pay in cost if you borrow the money for 12 months. The use of APR, including how it is to be calculated, is a legal requirement in Denmark, as it makes it possible to compare different types of loans.

The problem with using only the APR as a guideline for assessing how expensive a loan is, is that the calculation method is based on a maturity of at least 12 months. For a loan with a maturity of one to three months, this means that in the calculation of the APR, interest accrual must be stated, including the interest rate for the entire year. Even if one only calculates the interest rate charged over one to three months, it will often be very high interest rates. Therefore, one should always consider whether one needs to borrow money and whether there are other forms of loan with a lower interest rate.

Always obtain more offers on loans

money

Good Finance obtains completely free and non-binding loan offers right down to a loan amount of DKK 10,000, with a maturity of one year. Loans raised through Good Finance can always be repaid before time, so it can be a good and cheaper alternative to a quick loan, SMS loan and quick loan.

Apply for a loan Fill only one application and receive offers from several banks. Free and no obligation application now

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