Norwegians, and residents of Norway in general, are no strangers to taking out consumer loans. Quite a lot of people in this country secure these credit lines for several reasons and there are credible sources that back up this claim.
One such is the country’s finance ministry which showed concern over the rising problem of indebtedness among what is termed vulnerable households in the country. This led to reforms through new fiscal policies. You can read this article on the country’s finance ministry’s official website for more information on this.
This stat does not rule out the logic behind taking out consumer loans. Rather, it only stresses the need for prospective borrowers to make informed decisions before, when, and after them.
To do this, they must start by understanding the kinds of consumer loans, the implications of securing them, and how to properly secure them. These subjects will be addressed here in this article. So, ensure that you continue reading to learn more about (especially unsecured) consumer loans in Norway.
Kinds of Consumer Loans
To set the record straight, there is a difference between the types and kinds of consumer loans. So, both should not be mixed up. Speaking of the kinds, there are secured, as well as unsecured options.
Loan security is the striking difference between both options. In the case of secured consumer loans, collateral is involved, which offers some sort of security for creditors. This is not the case with unsecured consumer loans as only the creditworthiness of the borrower is the basis for which it is granted.
As a result of this striking difference between both, unsecured loans are usually more costly. The increased risk taken by creditors when they offer such is the reason for this.
Unsecured Consumer Loan Application in Norway
It is a rule of thumb to exercise more caution when executing risky tasks. In this context, granting unsecured loans to applicants is a more risky task for creditors. This is because they can completely lose out when such borrowers fail to repay their debt.
As a result, creditors who offer such are usually more cautious. In other words, more stringent policies are at work when it comes to assessing unsecured consumer loan applicants. By and large, below are some of the things it takes to be eligible for this kind of loan:
It takes (financial) maturity to properly utilize and service a loan. As a result of this, applicants are expected to have attained a certain age before their application can be considered. On a general note, the age requirement is set at 18 years.
However, some creditors are more stringent in this regard. For example, some would not consider granting loans to people below the age of 25, which is 7 years over the general age requirement. For the record, these creditors reserve the right to do this.
The creditor takes a risk when offering loans, especially unsecured ones as pointed out above. As a result, several things need to be checked out before such are granted. One such is residency status.
The creditor has to be certain that you are a resident worthy enough to be granted a credit line. This is why your address has to be submitted and confirmed. For the record, creditors do as much as confirming your address and residency status from databases made accessible to them.
By the way, some lenders are known to only consider the loan application of citizens. On the other hand, some are willing to grant unsecured loans even to non-citizens. However, such applicants are expected to have lived in the region for a reasonable amount of time. This is 3 years in most cases.
It is not surprising that a lender would be concerned about how much a prospective borrower earns. This is expected because the ability to repay a debt (s) is seriously tied to income status.
To this end, the lender inquires about the applicant’s income status and runs checks. For example, checks can be conducted by reviewing tax returns and contacting relevant authorities for this purpose.
Furthermore, something known as debt-to-income ratio is also considered. As the name suggests, this is the current debt by the applicant in relation to the income. This would be assessed to see if repaying the loan if granted is feasible.
The lender would be very concerned about how well the applicant has done servicing previous or even current debt(s). To this end, those who have payment notes have a significantly reduced chance of having their loan application granted.
The reason is that most lenders have reservations about the ability of such an applicant to repay. Of course, this is based on past or current disturbing debt issues. For this reason, people with such a debt profile need to sort out this issue.
Even if such an applicant would be granted loans, it would usually come with very hostile terms and conditions. For the record, getting such can even make matters worse.
A credit score is a rating system. This rating informs lenders of how creditworthy you are. A high/good score suggests that the person is very creditworthy. As a result, lenders will be taking very little risk offering such a person credit lines.
On the other hand, a low/poor credit score suggests that the person is not so creditworthy. As a result, it is very risky to offer such a person credit lines.
This is why people with low and even average credit scores need to work on improving their ratings. This increases their chances of securing loans. Furthermore, it increases their chances of securing loans with very improved terms and conditions.
Secured Consumer Loan Application in Norway
Secured consumer loans are majorly tied to the worth of the security being pledged. However, a couple of things are involved in securing this kind of consumer loan in a place like Norway. Some of the requirements include the following:
Credit Score Assessment
Although not as important as it is with unsecured consumer loans, an applicant’s credit score is still important here. It slightly determines the loan’s terms and conditions that would be presented to the applicant if the application is considered.
Some documents will be requested by the lender. These documents include proof of identification, income, as well as details about the collateral.
Submission of Application
The journey of assessing the applicant properly begins at this stage. This starts with examining the presented documents.
The actual value of the collateral that the applicant is willing to pledge will be assessed. In situations in which the applicant does not have full ownership, the amount of equity possessed and its worth will be assessed.
Approval & Agreement
The loan request will be approved if the lender considers the applicant fit enough. This would then lead to the drafting of terms and conditions. This would determine the amount to be loaned, the repayment schedule, as well as the interest rate.
The prospective borrower is expected to agree to the terms and conditions if he/she is fine with them. If not, there could be room for negotiation or refusing the offer since there is no obligation to accept it.
Transfer of Collateral
Temporary transfer of pledged collateral will then happen if the applicant agrees to the terms and conditions. This puts the creditor in a position to withhold the pledged security if the borrower does not fulfill his/her end of the bargain.
Reasons Why Most People Opt for Unsecured Consumer Loans
Most lenders use unsecured rather than secured consumer loans. One would think that this would not be the case considering that unsecured consumer loans are usually more expensive. However, there are several reasons for this including:
Securing a secured consumer loan means that a form of security is pledged. This is so that the creditor has something to hold onto if the borrower is unable or fails to pay the debt.
Well, this means that the borrower must have collateral in the first place. It turns out that many people who need credit lines do not have collateral or a suitable one. As a result, they are not eligible for this kind of consumer credit line.
Unwilling to Take Risk
There are several implications of taking out a loan. For one, a loan represents a risk. All parties concerned are taking some measure of risk.
On the part of the creditor, the risk is that the borrower may fail to repay. It is riskier for the creditor when it is an unsecured loan. This is because there is no form of security to hold onto.
On the part of the borrower, the risk is that things that might lower or eliminate the chances of repaying the debt in due time may arise. It even becomes riskier when it is a secured loan.
This is because the pledged collateral can be legally withheld and even lost if repayment becomes impossible. Unwillingness to lose pledged collateral is a reason some people who even have security to pledge may still opt for unsecured consumer loans.
Knowledge of certain tips puts loan applicants in a better position to secure the cheapest consumer loans. You can visit https://www.billigeforbrukslån.no/ for some of these tips. One such tip is to use the services of a finance agent.
This ensures that you can compare offers from several lenders and make very informed choices before agreeing to any loan agreement. For this reason, it is a good idea to use the services of finance agents as a loan applicant.
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Singh is an experienced spiritual writer and the resident author at Guruvanee.com. With a deep passion for exploring the mystical aspects of life, Singh delves into various spiritual traditions, philosophies, and practices to inspire readers on their spiritual journeys.