Gone are the days when loan applications are complicated and tedious. In Sweden, taking out a loan is common for individuals who require a larger amount of money to fund a purchase, achieve a life milestone, or launch a business venture. There are hundreds of loan providers – spanning banks, online lenders, and other financial institutions – and borrowing money has become more accessible than ever before.
In this guide, we will explain what personal loans are, several factors to remember when applying for a personal loan, and how you can use a loan comparison provider to find the best fit for you. The last point is particularly important for those who are borrowing money for the first time, as the process can be overwhelming with a large array of providers and loan types in the Swedish landscape.
If you are a first-time borrower residing in Sweden, you must also take the time to understand loan terms, from what they include and what certain words and phrases mean. Click here for an explanation of key terminology or read on below to get an intro into the world of personal loans.
What are personal loans?
A personal loan is a type of loan that the borrowers repay in monthly instalments. Personal loans are unsecured, which means they are not backed by collateral or any asset, such as a vehicle or a home. They are therefore based solely on the borrower’s creditworthiness and ability to repay the loan.
Why take out a personal loan?
There are many reasons for taking out an unsecured loan. However, the most common ones are debt consolidation, to cover personal expenses, or covering significant expenses like weddings.
A point to remember when applying for a personal loan
As personal loans are unsecured, when you apply for one, banks and lenders consider your credit score, credit report, and debt to income ratio. The interest rate for the loan is directly dependent on these factors. If you have a good credit score, you may be entitled to lower interest rates and eligible for a higher borrowing amount.
The different types of loans available in Sweden
There are many different types of loans available in Sweden, beyond unsecured, personal loans. They include car loans, home loans, and student loans. Some of them are secured – such as car and home loans – as they are tied to the vehicle or the home.
Car loans can be taken under the category of personal loans, but you should remember that if you are unable to pay off the debts of your loan, your car may be confiscated. Home loans are divided into four categories – home purchase loans, construction home loans, land purchase loans, and home repair loans.
Finally, student loans are usually borrowed to pay college fees, books, tuition, room, and other expenses. These loans typically come under a different scheme, and borrowers apply with the government. However, for certain degree programmes, some borrowers may choose to take out a personal loan to cover their expenses.
Why take out a loan in Sweden?
For many first-time borrowers, there may be hesitation in taking out a loan. After all, it is unfamiliar territory. However, the borrowing landscape in Sweden has a wide range of loan types and plenty of educational resources if you know where to turn – and loans can offer a few advantages:
- Access to funds: taking out a loan is a good way to gain access to funds or a line of credit, which can allow you to cover expenses or make purchases that you may not otherwise have enough funds for. When people buy a flat or a car, they can pay off the asset slowly.
- Financial flexibility: for individuals who would like to address temporary financial gaps or would like to manage their cash flow better, they can take out a loan to tide them over. This is useful for the self-employed or those with irregular income streams.
- Building a credit history: loans, when paid off on time, can also help you establish and improve your credit history. A positive credit history can be very valuable if you plan on borrowing more money in the future, and it can help you secure lower interest rates and more favourable financial terms.
- Consolidating debt: if you already have existing debts, taking out a loan to consolidate these existing loans can be a good way to help you secure better loan terms. This can save you money on interest charges in the long term, and consolidating your loans can also reduce the number of monthly payments that you make, streamlining your debt repayment process.
How to find the best loan for you
If you are planning to take out a loan for the first time, there are a few important points that you should consider – such as how to calculate the amount you will need, how to find the best provider, and the most favourable terms that would work for your circumstances.
Understanding your needs, goals, and circumstances
To find the best loan for you, you need to understand what your financial circumstances are. This includes if you have any outstanding debt, your income, your expenses, and other considerations. You should also make sure that you know why you are taking out a loan, and what your repayment plans and goals may be.
Using a loan calculator
A loan calculator is a virtual device that many loan providers offer on their websites, that allows you to calculate monthly instalments. You enter the principal amount (the amount you have borrowed or wish to borrow), the rate of interest, and the total number of years. It gives you the exact amount of money that you will have to pay over the years monthly. This can be a good way of breaking down a repayment plan into more manageable chunks.
Working with a loan comparison provider
Finally, one of the best approaches you can take as a first-time borrower is to work with a loan comparison provider. These are websites that have access to the money borrowing landscape, and they can provide information on the many different available loans for you to compare. Often, loan comparison providers partner with banks, lenders, and other financial institutions to stay up to date with their loan options, and they inform borrowers of their options in a transparent and unbiased way.
How to apply for a loan in Sweden
If you are looking to apply for a loan in Sweden, you should make sure you are a registered Swedish resident. You will also need the following, which almost all Swedish loan providers ask for:
- A Swedish bank account
- Your birth certificate (as proof of age, as all borrowers must be at least 18 years old, with some providers only lending money to people who are 21 years old or above)
- Proof of income or salary slips
- Registration certificates and registration ID number
- Your credit score
Final words
Getting a loan in Sweden is an efficient and easy process. If you are a first-time borrower, you should ensure that you understand what your needs for the loan are first, as well as your financial circumstances. Once you are ready to start searching for a loan, a loan comparison provider can help you search regionally to find the best options for you. Remember that all loans must be repaid, and you should never take out more money than you can afford to.
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