Until your 18th year of life, you fall under the responsibility of your parents when it comes to taking all kinds of decisions. Until that moment you are officially a financial minor. From your 18th birthday this sudden change. You can make your own choices. You will have to take out health insurance yourself, and if you have enough income you will also have to pay taxes to the tax authorities.
From that moment you are also jointly and severally liable for large purchases that you make. This means that you must have the money in your account if you want to make an expensive purchase. That may just provide a problem since your 18th you have often not such a very high income. It is not for nothing that many young people choose to deal with the first difficult financial troubles with a personal payday loan.
Where do you take out such a payday loan?
You take out such a loan with a bank or with another lender. It is not something you can do in a few minutes. The lender will first want to have a look at a number of things about your financial situation before he will provide you with a loan. After all, the lender takes a risk with you. He wants to make sure that you are able to pay off your debts after you have entered into them.
That is why your income will be carefully considered. This also includes surcharges and any student financing that you receive at that time in the income statement. These items together form the income from which you have to pay everything. In addition, your fixed costs are considered. The costs of a telephone subscription, the rent of your house and your fixed costs such as gas, water and electricity are mapped.
When your expenses have been deducted from your income, you have an amount to spend. This freely spendable amount can be used in part for the repayment of your loan. The maximum amount you can borrow from a lender is calculated on the basis of this amount. Then it is checked whether you have no other debts that you have to pay off. This check is done at the BKR, the Credit Registration Office.
What about the repayment of a payday loan
When your loan application has been approved by the lender, you must sign a contract. This indicates that you agree with the loan and with the terms set to repay the loan. It is of course never the case that only the borrowed amount must be paid back. You always pay a percentage of interest on a loan. How much interest you pay depends for the most part on the interest rate at that time. If that interest is in the red or borrowing money is attractive, the interest rate that you have to pay on your personal payday loan will also be reasonably low. However, if the interest is high, you will have to pay a considerable percentage of interest to the lender on top of the repayments of the loan amount.
A lender may set a number of requirements for you as a debtor. First of all, you will be required to pay your wages or income into your bank account at the bank where you take out a loan. So if you go to an ING bank, for example, you will also have to have an ING bank account to which you have your wages deposited. In this way, the bank has a large guarantee that the money will actually be repaid monthly. In addition, the bank will require that the amount you pay in repayment automatically transfers to them at a fixed time.
The difference between a personal payday loan and a revolving credit
Such a payday loan is a loan that you take out for a number of years. You usually repay such a loan over a period of around 60 months. The interest rate that you currently pay for such a loan differs from 11.15% with a credit limit to 2500 euros to 6.75 percent with a credit limit to 50,000 euros.
A revolving credit is another form of borrowing. Hereby you have a credit that must meet the same requirements as a loan. However, you are not only paying off after taking out a revolving credit. You can also withdraw the repaid amount, so that you permanently have a certain amount as a reserve.
A revolving credit will therefore not be as high as a personal payday loan. These are often amounts that start with a credit limit of 2500 euros and go up to around 25000 euros. A revolving credit therefore has no fixed term. With such a loan it can take a long time before the full amount is repaid. Yet it is not a good idea to continue this situation for quite a few years. The reason for this is that you have to pay a substantial amount of interest each month on the amount that you have red on your revolving credit.
The alternative to a loan
To be able to provide a piece of money in the event of unforeseen expenses, it is easy to borrow money. However, this is not the most practical solution. It is more convenient to have an amount of savings in hand in case you really need extra money urgently. You can easily save if you put an amount in a savings account at a fixed time. When you have money to pay repayment on a loan, in principle you also have money to deposit in a savings account. That way you stay away from financial problems, although you will have to cope with less luxury at certain moments in your life.