On this page we present what a bank loan is. A bank loan covers over several names and types of loans. Therefore, the purpose of this text is to provide an overview of the various types of bank loans. To understand the different possibilities of bank loans, we also explain the difference between unsecured vs. Unsecured loans, bank loan costs and how you best compare loans.
Therefore, if you are considering applying for a bank loan, or just want to get more information on the subject, you have come to the right place. Below we will guide you to choose the right bank loan.
What is a bank loan
A bank loan is a collective term for a loan that you can take with a bank.
A bank loan is therefore an umbrella term that can cover several different types of loans. If you want to get the cheapest possible loan, it is crucial that you choose the right loan type as it can be an expensive pleasure not to choose the cheapest loan on the market.
A LOAN IS NOT ONLY A LOAN
When you go out and borrow money, it is crucial that you choose the right loan, depending on what you need the money for.
A bank loan is a broad term that covers all types of loans that you can take with a bank. Some of the most common types of loans from a bank include:
- share Mortgages
- Home loans
- Car loans
Which type of loan is most appropriate for you depends largely on what you need to spend the money, as the price of the loan varies greatly. The price of a loan is first and foremost an expression of how high a risk the bank considers it to be that you cannot repay the loan.
A bank’s main idea is always to ensure that they get their money back and make money in this regard. If the bank considers it unrealistic that you can repay a given loan, then they will not lend you money.
But even if the bank wants to lend you money, many situations can arise where the bank can offer you several different loans for the same purpose.
And in these situations, it is of course the bank’s interest to make as much money as possible. It is especially here that it is crucial for you as a borrower to choose the cheapest loan on the market.
What is saved is earned – and when you have to borrow money in the bank, there is often a lot of money to save.
DO YOU HAVE A SECURE OR SECURED LOAN?
When it comes to the many loan types offered by Danish banks, they can generally be divided into ‘secured’ and ‘unsecured’ loans, respectively.
A loan with certainty means that the bank has an asset that can be pledged as security for the money that has been borrowed. This includes, in particular, all types of home and car loans, but it can also include, for example, loans for boats and motorcycles.
When a person takes out a home loan, the person thus buys an asset – that is, an object that has a value that can be realized by the bank. Therefore, if a person cannot pay his monthly payment on the loan, the bank can sell the home and in this way get a large part or all of his loan amount back again. This means that the bank has a relatively lower risk of borrowing a given person money.
At the other end of the scale there are reverse unsecured loans. These are loans that are taken up without a specific purpose in mind, such as buying an asset like a home or a car. Unsecured loans therefore typically include typical consumer loans. Consumer loans can in most cases be admitted for the purchase of everything from furniture to a wedding or a holiday.
And although we all need both holidays, furniture and although most would like to hold a large wedding, the bank here does not have the same certainty that they will get their money back.
Therefore, unsecured loans typically have a significantly higher interest rate than a secured loan. However, the loan amount is also typically lower on a consumer loan than a home loan and therefore the maturity is also shorter. That is, you have less time to repay the money.
CHOOSE THE RIGHT LOAN FROM THE BEGINNING
If you are in any doubt about the type of loan that best suits your situation, then we would like to give you some general guidelines that you can adjust depending on what you are borrowing for:
IF YOU MUST MAKE MONEY FOR HOME:
If you have to borrow money to buy either a homeowner or a co-operative, it would always be best to take out a co-operative or home loan. Loans related to home purchase are typically the largest loans that you take as a private person. These are secured loans, where you can typically choose a maturity of 20-30 years.
IF YOU MUST MAKE MONEY TO CAR
If you instead need to borrow a car, you can both choose to take a car loan where the bank for mortgage in the car and a consumer loan where the bank does not have security for the loan in the form of mortgage in the car. Here, it will typically be the best solution to take out a secured loan, as, like in the case of mortgages, the bank has a lower risk, which is reflected in a lower interest rate and possibly at lower costs.
You can read much more about the conditions that typically apply to car loans on this page.