19, Nov, 2020
Simulation loan: I find the loan that suits me

Simulation loan: I find the loan that suits me

A. What is a loan?

A. What is a loan?

A loan, or credit, is a budget advance granted by a bank or financial institution for the financing of a project. The sum borrowed, plus interest, must be repaid in full by the deadlines set by both parties. All of these elements are listed in the said loan agreement. It is entirely possible for you to perform a credit simulation on OneTopNotch in order to have an overview.

B. What are the types of loans?

B. What are the types of loans?

Depending on the reason for the loan, it is important to separate two types of credit. If the amount is paid directly to the borrower’s account and he can dispose of it at his convenience without having to justify his expenses, it is a personal loan. On the other hand, if the sum is allocated to a specific project, such as the purchase of a car, the loan is said to be affected.

B.1. Personal loan

A personal loan, also known as an installment loan or all purpose loan, is a consumer loan with fixed interest rates and fixed monthly payments specified in the contract. The applicant can borrow and use the sum received at his convenience without the need to justify it. This credit does not finance a defined purchase: it is therefore unassigned. The interest rate is generally higher for an unallocated personal loan than an assigned loan because the lender has no collateral. On the other hand, the sum is generally quickly available and the steps are few. But as for any loan, it requires to be able to justify income (pay sheets and bank statements) and prove that the amount borrowed can be reimbursed.

The organization of a wedding, a trip to Latin America, the purchase of a new television, the financing of studies of your children,… often require the borrowing of a certain amount. These are all examples of personal loans. If you want to make a comparison, you can go to this page and perform a credit simulation.

B.1.a. Loan study

The study loan is a financial aid granted by the Communities to students and families who fail to finance studies in one go. This credit covers the various expenses related to the student life: the payment of the minerval, the purchase of the books, manuals and other material, the renting of a kot as well as the cost of the daily life. The student credit can be refunded in the following ways:

  • immediate: the monthly repayment starts immediately;
  • deferred: usually beginning 6 months after graduation.

In order to benefit from relatively low rates, it is important to estimate the amount of income and expenses to have a clear idea of ​​monthly inflows and outflows, and to try to find a student job in order to borrow less or bring in proof of income.

Take an example: the cost of studying for 5 years (Master) in Belgium.

  • The cost of a minerval is about 850 € per year. This represents nearly 4,250 € for 5 years.
  • Books and textbooks are also to be taken into account and the cost associated with it varies between € 2,000 and € 3,500 for 5 years.
  • The price of the accommodation will vary according to the type to choose, but it is possible to lodge for about 350 € / month. The lease period is usually one year. This amounts to € 21,000 over 5 years.
  • The food is about 200 € / month, ie 12,000 € over 5 years.
  • The price of transport varies greatly depending on the city and the means of transport. For example, a STIB subscription (for a student under 24 years old) in the capital costs 50 € / year ( 250 € for 5 years ).
  • Student life (social, cultural, sports) also has a cost, estimated at around € 50 / month, ie € 3,000 for 5 years.

Simulation of the loan:

Add up all this and you will arrive at about 44.000 € for the 5 years of study of your child. You can therefore apply for a study loan. For a credit of 44.000 € to be refunded over 5 years (60 months), you get:

  • Monthly fees of approximately 870 €
  • APR (annual percentage rate of charge) of about 7% (varies by bank)
  • Total cost of approximately € 53,800
  • An extra charge of 9,800 €

Loans study

B.1.b. Wedding loan

A wedding requires a large budget and it is not always possible to pay such a sum at once. A wedding loan is a great option to enjoy this amazing day. This credit can be used to cover the purchase of the dress, the rental of the reception room or to pay the caterer and the DJ. The repayment is spread over time and helps to put the pill of these considerable expenses.

Simulation of the loan:

Take the example of a wedding costing a total of around € 20,000 (including room rental, catering for 100 guests, DJ, photographer, decoration and clothes.) If you want to borrow some money (20.000 €) to repay over 4 years (48 months), you get:

  • Monthly payments of approximately 470 €
  • APR (annual percentage rate of charge) of about 6% (varies by bank)
  • Total cost of about 22,800 €
  • Or an extra charge of € 2,800

Wedding loans

B.1.c. Electronic devices loan

An electronic device loan allows, as the name suggests, to buy appliances, a new phone, a computer, a camera,… It is generally more interesting to turn to a banking institution to take such credit rather than the commercial sign, which acts as an intermediary and, therefore, takes a commission.

Simulation of the loan:

You’ve fallen in love with the brand new iPhone X but the 256GB version costs 1.329 €. Here is a credit simulation for a € 1,350 loan to be repaid over 2 years:

  • Monthly payments of about 60 €
  • APR (annual percentage rate of charge) of about 8% (varies by bank)
  • Total cost of approximately € 1,480
  • An extra charge of 130 €

Electronic loans

B.1.d. Loan decoration

The loan decoration allows to finance a new interior decoration and to buy new furniture, often very expensive. Thanks to this, the savings do not fall by the wayside and payments are spread over time.

Simulation of the loan:

You dream of redoing your kitchen but it will cost you around 5,000 €. After simulation of the loan, you opt for a loan to repay over 2 years.

  • Monthly payments of about 225 €
  • APR (annual percentage rate of charge) of about 7% (varies by bank)
  • Total cost of about 5.400 €
  • An extra charge of 400 €

Decoration loans

B.1.e. Holiday loan

A holiday loan is a personal loan contracted to travel. So you can borrow money not to touch your savings. In this way, you should not worry about the price of your little pleasures that illuminate the holidays. Performing a travel credit simulation will help you identify the best loan for your project.

Simulation of the loan:

Your daughter has just finished her studies and you want to give her a nice trip, just to you two. You are planning a 17-day road trip to the national parks of the west. You have made inquiries beforehand and have been able to determine an approximate budget of 4500 €. A credit simulation to be repaid over 2 years would give:

  • Monthly payments of about 200 €
  • APR (annual percentage rate of charge) of about 7% (varies by bank)
  • Total cost of approximately 4.850 €
  • An extra charge of 350 €

B.1.f. Redemption of credits

Also known as debt consolidation, refinancing or loan consolidation, the redemption of credits involves taking out a loan to repay all others: borrow money to pay back existing loans. The selected financial institution clears all outstanding credits and offers a single loan whereby all payments are combined into a single monthly payment, a single interest rate and a single repayment term. No more complex repayments of different loans.

On the side of benefits, monthly payments, interest rates and duration are specified in advance in the contract and refund management is very simple. On the other hand, it is sometimes difficult to obtain debt consolidation, the duration of the debt and the total amount to be paid are higher.

Simulation of the loan:

Take the example of Marc, 30 years old. He chose to finance various projects via credit. Each month, he reimburses several consumer credits.

  • A car loan for the purchase of his new Mercedes. He still has to pay 443 € / month for 23 months, for a total amount of 10.189 €
  • An installment sale for the purchase of his new salon. He has 25 monthly payments of € 230, a total of € 5.750
  • A credit opening with his Visa card for which he still has to pay € 2,500 (€ 189 / month).

The total of these loans amounts to 18,439 €. He wants to reduce his monthly payments because he has difficulties to repay them in time since his divorce. It therefore introduces a request for repurchase of credit for a total amount of 18,400 €. After credit simulation, a repayment over 4 years (48 months) gives:

  • Monthly payments of about 460 €
  • APR (annual percentage rate of charge) of about 9% (varies by bank)
  • Total cost of approximately € 22,200
  • An extra charge of € 3,800

B.2. Assigned loan

The same goes for the loan assigned except that the purpose must be specified: the purchase of a car, renovations,… There are generally specific categories of credits for these different loans. To qualify, you must provide proof of purchase to the lender, which, therefore, takes less risk. It has an additional guarantee: in case of cancellation of the contract of sale of the good or the service, the associated loan is generally canceled without additional costs. In the event of non-payment, the financial institution may seize the property purchased on credit. Thanks to this, the interest rates are more advantageous than for a personal loan.

B.2.a. Car loan, motorcycle loan and caravan loan – mobilhome

These three types of loans are said to be affected because the purpose of the loan is simple: to fund a vehicle, whether new (from 0 to 2 years) or used. The age of the vehicle will change the interest rate: the older it is, the higher the rate will be. However, if the purchase concerns a car that has already driven on public roads, and therefore considered as a second-hand vehicle, the borrower will generally benefit from the same conditions as if it were a new car.

In addition, you can request up to 120% of the amount to cover ancillary costs such as insurance, traffic taxes, interviews, etc. In order to benefit from these loans, the borrower must provide the lender with a room proof of purchase. The property concerned then serves as a guarantee to the financial institution which, in the event of non-payment, can seize it.

Different types of vehicles are involved in this loan. It is possible to borrow money to finance a car, a motorbike, a van, a van, a caravan, a mobile home, an electric bike… It should be noted that, despite different names, it is possible to is a single type of loan.

Simulation of the loan:

You have decided to buy a new car and have fallen for the superb Mercedes-Benz Class A. To finance it, you take a loan of € 36,000 (100% of the sum) to be repaid over 5 years (60 months).

  • Monthly payments of about 620 €
  • APR (annual percentage rate of charge) of approximately 1.50% (varies by bank)
  • Total cost of about 37,300 €
  • An additional charge of € 1,300

B.2.b. Loan renovation or work loan

A renovation or work is often very expensive. Entering a renovation loan makes it possible to finance the development and to quickly dispose of the necessary amount for the investment. To do this, simply go to a financial institution with the estimate of the work envisaged or the order form if necessary, and voila. The interest rate is fixed and guaranteed throughout the repayment period.

This type of loan is useful when you want to remake his bathroom, enlarge the house, change the kitchen, build a swimming pool… If the work aims to reduce energy expenditure, it is better to turn to a energy loan, which allows to benefit from a lower interest rate.

Simulation of the loan:

You have decided to build a veranda and have received a quote of 12.000 €. You therefore take a credit (12.000 €) to repay over 4 years (48 months).

  • Monthly payments of about 270 €
  • APR (annual percentage rate of charge) of about 3% (varies by bank)
  • Total cost of about 12,700 €
  • Or an extra charge of 700 €

Loans work

B.2.c. Ready energy

When the desired work is aimed at reducing energy expenditure, the bank can grant an energy loan, or green loan, at a preferential rate and more advantageous than a renovation loan. This is part of the banks’ approach to promoting environmentally friendly initiatives. In addition, Regions award bonuses in this type of work. Attention: the types of arrangements however depend on the chosen bank. In general, it will be: insulation of the roof and floors, installation of double glazing, a solar water heater, a heat pump or photovoltaic panels.

Simulation of the loan:

You want to add value to your home by installing photovoltaic panels. The price given by the entrepreneur is 16.000 €. You want to repay the loan over 4 years (48 months). According to the credit simulation, this would give:

  • Monthly payments of about 350 €
  • APR (annual percentage rate of charge) of approximately 2.50% (varies by bank)
  • Total cost of approximately € 16,900
  • An extra 900 €

3. Loans between individuals

This type of loan is an alternative method to the traditional banking system to avoid going through a financial institution to obtain, mainly, a micro credit. This system makes it possible to limit banking and refinancing fees as well as to favor the exchange between people rather than with a financial institution.

The Mozzeno start-up is the first platform to allow lending between individuals. But what does it mean? Well, it is a collaborative system in which the financial resources of one can finance the projects of others. Here, investors choose the project they want to support.

Simulation of the loan:

For example, you want to build a veranda, attached to your house. You have obtained a quote of € 10,000 and wish to apply for a loan from an individual. At Mozzeno, at least 75% of the amount loaned as part of a renovation loan must be allocated to the works. For a loan of 10,000 € to be refunded over 2 years (24 months), this will give you:

  • Monthly fees of 450 €
  • APR (annual percentage rate of charge) of 7.74% (for risk class C)
  • Total cost of 10.798 €
  • An extra charge of almost 800 €

4. Social loan

This type of loan is reserved for those who can not take out a normal loan: the interest rates and conditions are more advantageous than in the case of a traditional loan. They are usually managed by social housing and vary by region. In Flanders, Vlaams Maatschappij voor Sociaal Wonen (VMSW) is the body responsible for social loans. In the Brussels-Capital region, it is the Housing Company of the Brussels Region (SLRB). Wallonia is represented by the Walloon Housing Corporation (SWL). But the social loan has its limits and it must meet certain requirements: it is not possible to buy business or holiday homes and the amount of the loan is limited. In the case of a renovation, proof of the need for such work must be proven.

5. Bridge credit

A bridge loan is a short-term mortgage that covers the period between the purchase and sale of a home during which cash is needed. In this case, the financial institution advances the necessary amount pending the sale of the first property to allow the purchase or construction of the second. The duration (3 years maximum) of this loan varies according to the banks and the interest rate remains fixed throughout the duration of the loan. It is therefore essential to perform a bridge credit simulation.

The value of the bridge credit is related to the estimate of the dwelling for sale and the remaining balance of the existing mortgage on that property.

Explanatory example: the value of the old house is 300.000 € and there remains 140.000 € of the mortgage loan to repay. The new house costs 400.000 €: it is possible to contract a bridge credit of 160.000 €. The remaining € 240,000 can be financed by a new mortgage loan.

6. Mortgage loan

The mortgage loan allows you to finance, over a period ranging from 10 to 30 years, the purchase of a house or an apartment, a building plot or the construction or renovation of the house of your dreams. With such financing, the property is pledged (= mortgage), thus allowing the financial institution to have a guarantee. Indeed, in case of non-refund of the credit, he can seize the good.

As with any credit, you will have to pay interest on the borrowed amount and repay it monthly for a predetermined period. In addition, the amount of the loan granted will vary according to the household’s monthly net income, the interest rate and the loan duration as well as the proportion (ratio between the amount borrowed and the value of the property estimated by the financial institution grant the loan).

But a mortgage loan also involves ancillary costs. Indeed, there are several key factors to consider:

  • notary fees
  • the notary’s fees
  • registration fees
  • the mortgage right.

C. Conclusion

So you understand, a loan, whatever it is, does not contract lightly. It is important to study the different financing possibilities before making any decision. If you decide to turn to a credit, consider comparing the offers of financial institutions. Indeed, they will not offer you the same loan conditions. Be that as it may, pay attention to the following: interest rate (APR), loan term, loan amount and loan conditions.

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