It's better to save for a large expense than to borrow money. But sometimes you have no other choice. What's the best loan in each situation?
A new car
You can take out a personal loan for a car. With this, the interest rate and term are fixed. This allows you to tailor the loan term to the lifespan of the car. Another option is hire purchase. You pay for the car in installments. Only after the final installment is the car yours.
More and more people are choosing private leasing. You essentially rent the car from the leasing company. The car never becomes yours. You pay a fixed monthly fee. Your monthly payment also includes insurance, taxes, maintenance, and damage repair. This gives you certainty about your monthly payments.
Be sure to check all the terms and conditions first. How long are you committed to the contract? Can you cancel it early, or will you pay a penalty? What are the monthly costs, and can you afford them if your income decreases?
A private lease contract is usually registered with the Credit Registration Office (BKR), just like a regular loan. This means you can borrow less money in the future, for example, to buy a house. Before taking out a loan or lease, consider buying a cheaper or used car.
Private leasing: the pros and cons
Link to the Consumers' Association website
A washing machine, furniture, or other household goods
You can often lease household appliances for a fixed monthly fee. Be sure to carefully review the terms and conditions. Also, calculate your total payment over the term. This is often much more than if you pay for the appliance outright.
Another option for replacing a broken appliance is taking out a personal loan. You can also often buy on credit from the store or website where you make the purchase. This is called hire purchase. After paying the final installment, you own the product. Before buying on credit, see if you can buy cheaper items with your savings.
Compare loans based on interest rates and terms
If you want to buy a new washing machine or a different car, you can often take out a loan from the seller. However, a loan from the seller usually doesn't have the lowest interest rate or the best terms. Find out who offers the cheapest loan with the best terms. Borrow the money there and then make the purchase.
Car repairs
Do you have major repairs and no savings? The best option is a personal loan. You know in advance how much interest you'll pay and how quickly you'll have to repay the loan.
Insufficient financial buffer
Do you regularly find yourself short on money for bills, groceries, or unexpected large expenses? Then your financial buffer is too small. See if you can cut back on your expenses to build a larger buffer. Calculate the buffer that suits your situation and find out how you can cut back.
Calculate how large your personal buffer should be
Link to the Nibud Buffer Calculator
Home renovations
A mortgage is usually the cheapest way to pay for renovations. You do pay advisory fees, but the interest rate is lower than with consumer credit. See if you can get a second mortgage from your mortgage provider. For energy-saving investments, you can also take out an Energy Saving Loan. The interest on this loan is relatively low. Another option is a personal loan.
More information about the Energy Saving Loan
Link to the website of the National Heat Fund
Paying bills
Are you temporarily short on cash to pay your bills? Then you can use the option of an overdraft on your current account. You can also take out a revolving credit line. The interest rate for this is often slightly lower than for an overdraft.
Consider the term of your loan
Consider in advance how long you will use the product for which you are taking out the loan. Make sure the loan term does not exceed the period in which you use the product. Do you think you will drive the car for 3 years? Then limit the loan term to a maximum of 3 years. This prevents you from paying for something you no longer use. And paying it off sooner is always a good idea.
Daily expenses
Do you regularly find yourself short on cash to cover your daily expenses? Then consider the options for an overdraft or a revolving credit line. However, borrowing money isn't really a long-term solution. See how you can generate more income. Or try to save money. Ask for help; you're not alone.