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Borrow money in Denmark
Loan (lån) in Denmark is here used as an umbrella for the borrowing of money without security, also called an unsecured loan. And where the money is not earmarked for a specific purchase. This is why APR becomes a key concept which we will come back to later. This goes for consumer loans, unspecified bank loans in Denmark, overdraft facility, credit card loans and so on. Car loans are also included here because the value of the car, and therefore the security, decreases over time. They are all fast loans or quick loans.
Online loan in Denmark
The most important figure to keep in mind if you are looking for a loan in Denmark is APR, in Danish called ÅOP. This is an abbreviation for annual percentage rate. This covers the total annual cost for having obtained the specific online loan with or without collateral. This means that the allocation between interest rate and fees is without importance.
Loan companies in Denmark is obligated to inform consumers about the APR.
APR for fast loans
APR is a function of the collateral for loans and the security for the loaner of an online loan in Denmark is limited. As a consequence of the lack of security and because the performed credit evaluation is limited the APR for these kind of fast loans can be high. This is due to the fact that people normally obtaining an online loan in Denmark can be under average payers. And fast loans are usually on low amounts.
This means that the people who actually complies with the conditions are paying for the people not complying with the conditions of the loans.
So it depends on the circumstances whether or not it makes sense to get on of these loans.
These circumstances can be that you are a student or unemployed with a good prospekt of getting a job.
If you buy on credit in a store, APR is once again the most important figure to keep in mind. The interest rates can easily be low or non existing. But if that is outweighed by higher fees or things like that, the advantages of low interest rates are offset.
Future impact of fast loans
Should you actually be able to buy on credit without any sort of extra costs, it can easily be a decent solution. But you just need to pay attention to which meaning it will have for your economy to pay the monthly/quarterly repayments. And if the store really is willing to sell on credit without any sorts of extra costs for the customer, they would probably also be willing to give some discount at cash payment.
Are you borrowing 10.000 kroner at 10% interest with repayment after 10 years. And are you only paying interest until repayment, you will end up paying 10.000 kroner in interest for having borrowed 10.000 kroner.
Overdraft facility and consumer loans in Denmark
An overdraft facility is a standing amount a bank makes available for the borrower without a fixed repayment schedule. A fixed amount is agreed, 10.000 for instance, and of that you can use and repay as you should wish and need.
The APR is higher than for classic bank loans. But on the other hand you have the flexibility to use and repay the credit as wished and needed. This means that you only have interest costs of the money you actually use. For a standard bank loan you pay for the total borrowed amount disregarding the use. And for a standard bank loan you have fixed terms for when you have to repay the money.
For an overdraft facility you can also get high interest rate for your own money, as you save interest costs when you put money into the account and thereby draw less on your credit facility. If you spend more the the agreed amount, you account moves into overdraft. And then you will have to pay even higher APR than agreed to by account conclusion.
Credit card in Denmark
Credit card such as Mastercard, American Express and certain store cards for department stores and gas stations, are different from a Danish dankort. A dankort is a debit card, by not having the money subtracted from your account at once. But a credit card have the consumption for the whole month added up and drawn simultaneously.
This provides you with at least one month worth of credit. And can for some people give a better overview of their consumption. Besides that, it increases the possibilities of withdrawing and using money when you are abroad. When you are abroad maximum credit limits on dankort/VISA exists.
For other people credit cards can be an unnecessary temptation.
Student loan in Denmark
Student loans, or a SU loan as they are often called, are quite common in Denmark. The government lends out money to students on a monthly basis at fairly attractive rates. The monthly amount is fixed, but the student can decided which months they wish to utilize.
The money plus interests only has to be paid back as of January 1. the year after finalisation of education.
Car loans in Denmark
For a car loan collateral exists in the car. But as the car concurrently loses value the collateral for the loan provider naturally becomes weaker in time. This is why the interest rate for this kind of loan is higher than for mortgage.
Car leasing is another way than a standard loan to finance a purchase, in this case a car. For traditional car leasing you pay an amount upfront to make a deal. Whereafter you pay a monthly leasing amount.
If you like to change car regularly, car leasing can be a good solution. You can at termination of the deal just redeliver the car to the leasing company and go out and lease another car. You do not have the hassle or risk by having to sell a used car. When leasing a car it is the leasing company who takes care of car repairs. So if you do not want to take on that risk, leasing is a possibility.
Mortgage loan in Denmark
Mortgage or housing loans in Denmark work different then in most other countries. The first 80% of the purchase price can be borrowed via a mortgage loan which is traded directly in the Danish bond market.
This is the main reason for the very cheap mortgage loan possibilities in Denmark. It is a secured loan with direct security in the leveraged property. So a collateralized loan obligation with a very low risk of losing money for the borrower.
The mortgage institute works as a intermediate between the borrower and the lender, and therefore do not lend out money directly.
The next 15% can be borrowed at a bank and the last 5% has to be delivered in cash.
Hints for fast loans in Denmark
If banks do not wish to lend you money, you really need a valid reason to borrow money elsewhere.
Overdraft facility can be a flexible and cheap alternative to standard bank loans, but it is of course better only to use money you have already earned.
Leasing should be examined as an alternative to a car purchases and an online loan in Denmark.
Always repay the most expensive quick loan first.
Read also: Broadband in Denmark