If you are going to borrow money with a consumer credit, you can choose from 2 forms: a revolving credit and a personal loan. What suits you?
Ways to borrow money
You can borrow money in different ways. A revolving credit and the personal loan are the most common loans. To help you choose a loan, we discuss the characteristics of both loans (with a calculation example) and for what purpose they can best be used.
Characteristics revolving credit
- Fixed monthly installment that amounts to 1%, 1.5% or 2% of the credit limit
- Fines-free redemption
- Variable interest
- Possibility of interim admission
- Flexible use
Example calculation: revolving credit 2% with a limit of $ 10,000
- Fixed monthly installment $ 200, – of which a part goes to interest each month and a part to repayment. As time goes on and no new withdrawals are made, the share of interest and the share repayment increase from the monthly monthly installment.
- Amounts previously repaid can be withdrawn later free of charge.
Features personal loan
- Fixed monthly period.
- Fixed duration.
- Fixed interest.
- In many cases it is not possible to redeem without penalty, in the meantime some parties do offer possibilities.
- Tax deductible if used for box 1 financing (home improvement, residual debt).
Example calculation: Personal loan of $ 10,000
- Based on the interest rate and term of the loan, a fixed monthly term is determined at the start. Based on a term of 10 years and with the lowest loan interest rate at the moment (4.2%, 19/07/2016), it amounts to $ 101.82 per month.
- This loan is then repaid with a fixed repayment schedule, duration and interest rate for 10 years.
- Amounts previously repaid cannot be withdrawn.
Purpose of revolving credit
- Extra flexible spending space.
- For example, as a substitute for red standing, for which high interest rates are charged.
Spending purpose personal loan
- Home improvement or residual debt in combination with tax deduction of interest paid. Also read: finance your renovation benefit
- In contrast to the revolving credit, the fixed-rate personal loan makes the interest paid deductible.
- Purchase spending target with limited economic life.
- For example a car, where you repay a loan within a fixed period after which you become the owner.