Norwegians are increasingly borrowing, and consumer loans are the most frequently taken up. Economic surveys and surveys show that approx. 1 in 4 Norwegians take out a consumer loan 1 or more times during their lifetime. Consumer loans are best known as unsecured loans. Within the “consumer loan” category we find large variations. There are so-called small loans that are loan amounts to less than $ 50,000, and then you have large loans of up to $ 500,000.
Why are more and more Norwegians taking up consumer loans, and what are the consumer loans used for?
This is why Norwegians take out consumer loans
Despite the fact that Norwegians are drowning in debt, the Norwegian consumer loan market has exploded and there is no prospect that the trend in consumer loans will stop soon. Today, consumer loans have become as common as mortgages, and consumer loans have become significantly more competitive than car loans.
Why have consumer loans become so trendy? Some economists have looked at the terms set by the welfare state. Are we simply financially well off that we can afford to take greater risk and borrow more money, or are we the opposite? That loans with collateral require such a high financial capacity on the part of the borrower that most of us simply do not have the opportunity to borrow other than consumer loans? What is the case there are disagreements about, but perhaps a mix?
A very popular loan form
One thing is for sure – consumer loans are popular because they are simple. First, there are few requirements for you to apply, and those requirements are affordable for most of us. The standard requirements are that you must be over a certain age, have a certain amount in annual income and not have any payment notes registered in your name.
Few questions are asked
Secondly, there are many lenders, in addition to traditional banks, that offer consumer loans of various sizes. Common to most of them is that they do not question what the money will be used for, and this lowers the threshold for many who want a consumer loan. Third, the application process for obtaining a consumer loan is quite simple. Many lenders apply online through a form that takes a few minutes to fill out, often you will also receive a response after a short time.
Since the demand for consumer loans has exploded so sharply, the number of non-traditional lenders has also exploded. The offer is large and varied, but what are the Norwegians using consumer loans for?
This is used for consumer loans
As more and more Norwegians take out consumer loans more often and also borrow large sums of money, the money must be used for something, but what? The answer is that consumer loans are used for a lot and very much different. What the consumer loan is used for, for simplicity’s sake, can be grouped into a few main categories:
- Unforeseen expenses.
- Buying a new or used car (consumer loans are becoming more popular than car loans).
- Appliances and other electronics.
- Refinancing of other debt – typically refinancing of small loans.
- Renovation of house, cabin, boat etc.
- Experiences such as vacations, courses, seminars and other activities.
1. Unforeseen expenses
Imagine that your car suddenly breaks down, or more wear parts appear like worn brakes and outdated lights that need to be replaced. Having your car in the workshop is rarely cheap, but something that needs to be done should be able to use your car for work, school and leisure activities. This is a common example of an unforeseen expense to which Norwegians use consumer loans. Unforeseen expenses can be anything from high bills, washing machine smoking, etc. There are often things we need quickly and may not have any savings for, which we borrow money for so we can buy it right away.
Although a standard car loan is still the most common Norwegians take up when buying a new or used car, studies show that consumer loans are becoming increasingly popular as an alternative to car loans. The reason for this is that for many people it is easier to get consumer loans than car loans.
3. Appliances and electronics
Many use consumer loans to be able to purchase new appliances such as washing machines, refrigerators and dryers. It is also not unusual to use consumer loans on other electronics such as a PC or camera. Many companies and companies that sell home appliances also issue consumer loans, or cash loans, as they are often called.
4. Debt refinancing
Many Norwegians who take out consumer loans do so to refinance other debts such as small loans or credit card debt. This is done because in most cases it is profitable to refinance other debt. You often get a lower interest rate on your new loan and because you are left with only one interest instead of many different interest rates on many different loans.
Another clear benefit of refinancing is that you get a much more uniform overview of your loan, what you owe, what interest you have and how much you have to pay off in monthly repayments.
Renovation of houses and cottages costs money, but Norwegians are still at the top of the world when it comes to renovation. It is very common for many of the unsecured loans that we raise to be used to renew our homes. Even renovating small rooms can come in several thousand, especially if you have to hire professional professionals, and most of us can’t afford to live with a run-down kitchen for years before we have enough savings ourselves.
Although consumer loans come with interest and some extra costs, most people believe that the value of the renovation itself makes it worth it.
There are very different opinions as to whether a consumer loan should be used to cover expenses related to experiences such as vacations, but in any case, experiences constitute a large pot of the unsecured loan used for. You may want to go on your dream vacation with your family during the summer, but can’t afford to pay it until you get the Christmas bonus at work.
Others want to attend exciting courses with a specific start date, but they can’t afford to cover up even after the course is complete. Common to unsecured loans is that they are used for things that borrowers attach to a value that is worth spending money on.