Borrowing money through the mini loan
The following article discusses borrowing in general, the different types of loans that exist in the Netherlands and specifically the mini-loan. This article is therefore primarily written to provide information about applying for a mini-loan and the details thereof. In addition, the different motives for applying for a mini-loan are discussed further and other types of loans are briefly discussed to illustrate the difference between the possible reasons why you could take out certain loans. At the end of the text, the benefits of a mini-loan are again pointed out point by point. You will also receive an answer to the question what is a mini loan.
It is always important to realize that borrowing money costs extra money. In addition, it is mentioned several times in the article that you should only borrow money if you are in a stable financial situation and have a good overview of this. Applying for a mini-loan should be a supplement to and reinforcement of your situation and should not be used to get you further into trouble. A mini loan should be a solution and not a symptom of a deeper problem. Further advice is given at the end of the text if your borrowing behavior has become problematic.
In today’s society, money worries have become a rule rather than an exception. This often involves only small amounts that occasionally fall short of a family or a person here and there. But because these amounts cannot be paid when this is necessary, extra costs accumulate over the amount. These extra costs are often higher than the original amount itself and ensure that a reasonably healthy financial situation can turn into a problematic situation. And because extra costs have already been made and this money also has to come from somewhere, an accident only has to be in a small corner to cause a further escalation. A broken washing machine, the purchase of textbooks or a more expensive than expected failing car inspection can be the proverbial drop.
There are often warnings about borrowing money from different types of agencies, family and friends. Borrowing money, however, is something that happens regularly in our society. Families take out a mortgage for their home, take out a loan from the bank to renovate or purchase a new car, and students borrow a scholarship from the government to study. Borrowing money has therefore become a standard activity in our financial environment. Of course it is nice not to have to take these steps, but the reality is that borrowing money is sometimes a necessity. This does not mean that you have to borrow money at random. It is important that you always keep a good eye on your financial situation. But within this situation there must be room to, for example, be able to borrow a small amount when this is necessary.
It can happen to anyone: the washing machine stops, the car needs an extra turn, your laptop did not survive the glass of coke or your phone fell out of your bag while cycling. Often these are utensils that are very important for the daily life of your life and that have actually become necessary for work or school. And sometimes on top of that the purchase of a new washing machine, telephone or laptop is just not convenient. A few weeks later it would not have been a problem, but to now have to bridge those few weeks without … For the smooth running of your household or work, they are sometimes essential. Those are the moments when you would already like to have some money in the coming month.
Family and friends
Of course there are other options than borrowing money from official institutions or companies. You can always ask friends or family if it is possible that you can borrow the desired amount. But unfortunately this is not an option for everyone. For example, you may not have the type of contact with your family that is suitable for requesting a loan. Or it may be that neither your friends nor your family can miss such an amount at that time. After all, not everyone immediately has a few hundred euros. Moreover, it may also be that you prefer not to borrow from family or friends. After all, you never know whether something unforeseen will happen that will make the loan suddenly hang around your neck like a millstone. These are all valid reasons to look further.
Borrow money as a good financial decision
Sometimes borrowing money is also not linked to an emergency. For example, you may see a new washing machine that will be on sale for a few more days. However, your salary will take a few more weeks. Even with a loan and paying back the interest you will be even cheaper with this washing machine than with another washing machine at a later date. It can then be smart to take out a mini loan. It may also be that you are dependent on your computer or laptop for your work as an independent entrepreneur. Unfortunately, this has failed, while the payment for your previous order has yet to come. Even then it is useful, for example, to take out a mini loan so that you can return to work immediately and do not have to miss out on any income. Applying for a mini loan is therefore not always an indication that it is not always going smoothly financially.
Note: borrowing money costs money
This slogan is widespread over the internet and the media. But in some cases, borrowing money can also generate money, as described briefly above. For example, if you cannot carry out your work temporarily without the loan or if you do not have to borrow a good investment opportunity by not borrowing money. In these cases, borrowing money will cost money at most in the short term and can also yield money in the longer term. It is therefore always wise to include the long term behind your decision. Does the equipment you need for your work have to be replaced, because otherwise you cannot accept the job for which it is needed? Then it is clear that a mini loan only offers financial benefits.
When is it unwise to borrow?
It is unwise to borrow if you do not have a good overview of your financial situation. As a result, you are not sufficiently informed whether you can carry the loan financially. By this is meant whether you have the capacity to pay the original amount, interest and any additional costs in the future. Therefore, first make sure that you have a good idea of your income and expenses and what you have left over each month or year. Also view your perspective for the future. Do you have a permanent job or a temporary contract? Are you expecting large releases soon or is a financial boost coming up? Only when you can oversee your entire financial situation for yourself now and in the future can you assess whether it is wise to take out a loan.
Borrow to buy luxury goods
It is never handy to borrow money if you would like to buy something extra for yourself. This can sometimes be very tempting, especially if, for example, you have had to wait a long time for a particular item. But borrowing money in such a case is a bad financial decision. You better put aside money and spoil yourself the moment you are actually financially able to do this. Mini loans are suitable for bridging a period in which you cannot avoid spending a certain amount within a very short period of time. So don’t borrow money because you really can’t wait another week to get the latest iPhone or game console.
Borrowing with savings
A further reason not to borrow is borrowing while you have savings in the bank. For whatever reason you may think it is more convenient to take out a loan. This may be because you would like to receive interest on your savings or because you actually reserved your savings for another reason. In these cases, borrowing is simply not recommended. You almost always spend more money on the loan and the associated costs than you spend on simply withdrawing money from your savings account. You can always top it up later, especially if you have enough money within a few weeks.
Types of loans
Forms of loans
You have various forms of loans. The mortgage and the student loan have already passed. Furthermore, according to the Nibud (National Institute for Budget Information) there are the following types: the revolving credit, the personal loan, the red at the bank, a flash credit, the hire purchase, the credit shopping at mail order companies and / or home shopping organizations, the use of loyalty cards, use of credit cards, leasing, lending with collateral and taking out a mortgage. The mini loan comes under a flash loan. Each loan type has its advantages and disadvantages and has certain situations in which they are suitable for use. Further on, each loan type is briefly discussed. After that a specific and in-depth description is given of what a mini loan is, what the advantages are of taking out a mini loan and how it works exactly to take out a mini loan.
Continuous and personal credit
With a revolving credit you can immediately borrow a certain amount in its entirety. Once you have recorded this, you also have to redeem. With a full repayment the amount can be borrowed again. The interest is variable over the term of the credit. With a personal loan, both interest and duration are fixed. Interest rates are often a bit higher than with a revolving credit, but will not just change. This type of credit is mainly taken out for higher amounts, with interest rates being fairly low. For example, it is suitable when renovating a house or when purchasing a car.
Red at the bank
Standing red at the bank is nothing more than opening a credit at the bank via your bank account number. You simply pay interest on the amount in the red. At some banks it is also possible that you are in the red without prior permission being requested. This so-called ‘unauthorized’ standing in red is a lot more expensive than standing in red for which permission has been requested in advance. This may seem like a handy way to borrow small amounts quickly, but it often invites you to borrow more than necessary and since the term is linked to the term of your bank account (in other words, until you cancel it yourself) it can be a very pricey story.
The flash credit
The flash credit is another name for a mini loan. So it’s all about borrowing money quickly in small amounts. In the past, these credits were not subject to credit regulations, but this has recently changed. That is why they are now safe to close and are a great option if you need a certain amount in the short term that you will have in your hands later. The great thing about a flash credit or mini loan, as it is mentioned here, is that you can keep track of exactly how much you borrowed and when you have to pay it back. At first glance, it may seem more expensive than standing at the bank, but practice shows that it is precisely the red position, as indicated above, that leads to higher costs.
Hire purchase, mail order companies and home shopping organizations
Purchase purchase includes the purchase of an object where the purchase value is provided as a loan. The object is then paid in installments and is only from the tenant until the entire amount is paid. High interest rates are often required for this. This type of loan is also frequently applied by mail order companies and home shopping organizations, with the associated high interest rates. The difference in the loan lies in the fact that, in the event of a lease-purchase, if the term is not paid, it is possible to collect the purchased object. A mail order company or home shopping organization will not proceed, but will continue to make long-term claims if no more payments are received.
Loyalty cards and credit cards
A loyalty card acts much like a credit card, but is tied to a single store or company. In principle, credit is purchased, whereby the amount spent must be paid with interest again at a later date. Both with a customer card and with a credit card, high interest rates are required and a deferred payment system is used. In addition, you must pay for owning a credit card. The risks are comparable to being in the red. Often there is little overview of the amount borrowed and because the cards are so easily available and often have high limits, more is spent than necessary. As a result, the costs can get out of control over the longer term.
When leasing, a fixed amount is paid monthly. There are two forms: financial leasing and private leasing. The first one is very similar to concluding a lease purchase, while the second one is much like simply renting. Private leasing is by far the most used option, for example when leasing a car. It also revolves around objects with a higher value of money. In some cases it may therefore be desirable to see whether a revolving or personal credit is not more effective.
Borrowing with collateral
As the name suggests, collateral is designated for this type of loan if the payment obligation cannot be met. This may include, for example, your home, other real estate, your car or certain more expensive goods in your possession. You can also use any securities or life insurance as collateral when taking out a loan. These are then liquidated the moment you do not meet your payment obligation. Here too, it concerns larger amounts.
A mortgage applies exclusively to real estate. In addition, that property is immediately collateral for the mortgage taken out. If, for whatever reason, you do not meet the payment obligation, the bank or your mortgage lender may seize the property. This is of course mostly about your home. The mortgage is perhaps the most frequently granted type of loan in the Netherlands.
Red are opposite a mini loan
It may seem as if it is cheaper to be in the red at your own bank at a lower interest rate. As indicated above, this rarely appears to work that way in practice. Because you are red on your own bank account, you often have less overview of the amount you spend. This may seem strange, but because it is your own bank account, you almost get a false sense of security. Moreover, standing in red on an account almost acts as a revolving credit, so you often spend too much money too quickly and over a longer period. Because of this, red may seem initially the cheaper option, but it will therefore often cost more money in the longer term.
A credit or loyalty card opposite a mini loan
In some cases, it may also seem more convenient to use a credit or loyalty card instead of taking out a mini loan. However, the same arguments can be put forward against this as opposed to using red. Publishing is very easy and there is often less overview. Moreover, these types of cards are suitable for long-term use, which means that you often lose more costs in the longer term than with the apparently high costs of a mini-loan. Moreover, a mini-loan is a specific amount that must be repaid within a very short period of time. Because of this there is no financial hassle in your administration and you keep a good overview of how you are doing.
Which loan is best to take out?
When taking out a loan you first have to ask yourself what exactly you will use the money for. In other words, you need to look at your situation. A certain type of loan is most suitable for every situation. Of course you prefer to avoid the need for a loan as a whole, but this is often not a possibility. Moreover, as already shown above, it can sometimes be a good financial decision to take a loan. Once you have determined the situation for which you should borrow, you can further decide which type of loan is most suitable for you.