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What does a student loan do with my future?

Are you a student and wondering if you can get a loan !? As a student you would think getting a loan is a difficult task. Nothing could be further from the truth because as a student you can get a loan in different ways where the provider is aimed at students. You must, however, be older than 18 and in most cases follow a full-time study.

Student loans with a revolving credit.

Student loans with a revolving credit.

Most Dutch banks offer student loans with a revolving credit of up to 5,000 euros. These student loans can often be paid off in the first few years without interest, but this interest is charged to the final balance. This means that you only pay the interest when you are no longer entitled to student finance. In most cases you even have the option of paying off your withdrawn credit one year after the student loan has ended. Interest is charged on this extra waiting year.

A short advance

A short advance

In addition to the maximum ‘red’ standing at your bank or the maximum additional loan to DUO (Education Implementation Service: former IB-Groep), you can also receive a temporary ‘advance’ which in most cases applies up to a 500 euro limit. You can get the desired amount in your account within ten minutes. Please note that you must pay it back in time because the interest rates on such loans are quite high. With this form of borrowing you do not have to take a full-time study.

Tax benefit.

Tax benefit.

If you are following a full-time course and you are probably borrowing more than a student loan with a parental contribution, you will not receive a tax benefit. This is because they are untaxed. When you borrow from a commercial company such as a bank, you are in most cases entitled to a refund of your tax. This is in fact added to your debts.

Are loans by definition expensive?

Are loans by definition expensive?

No, as a student you have to deal with an enormous amount of expenses such as rent, school fees, book fees, clothing, telephone and internet bills, etc. If you always receive extra administration costs on top of your reminders or even have to pay bailiff costs, in this case the interest on student loans is many times cheaper.

What should you pay attention to when taking out student loans?

What should you pay attention to when taking out student loans?

Take a good look at the duration of a loan in advance. With every loan you get a time frame in which you must have repaid this loan at the fixed interest rate. If you take longer to repay, higher interest rates will be added to your final balance.

Compare the interest rates with multiple providers. Every financial organization uses different rates. The interest rates can vary considerably and your task is to find the lowest interest rate. See if you have the luxury to take out a loan. You must of course be able to pay it back at a later date.

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How the new Mortgage Law affects cross-product contracting

The new Mortgage Law was born with the main objective of protecting the consumer.

It does so in such important aspects as the duty of prior information and the obligation to consult up to ten days in advance of all documentation before the notary. It also seeks the formation of more transparent prices , especially in the case of delay costs, which do not punish the citizen.

For all these reasons, it has also legislated on a controversial and abusive aspect: the obligation to contract products to grant a mortgage. The change and clear differentiation between the mandatory linkage, which is eliminated, and the regulation of the optional contracting of products to improve the conditions of the mortgage has become an essential point of the new Mortgage Law as explained below.

Willingness of contracting for the benefit of the consumer

Willingness of contracting for the benefit of the consumer

Compulsory contracting of insurance (life, home, payment protection, …), bank accounts, cards and even pension plans had become a very common practice in many financial institutions. The main problem is that as a mandatory condition this linkage made it difficult to remove these products , which in many cases meant a cost overrun for the consumer. They even secured payment on products such as life insurance by paying their entirety as a single premium at the time of contracting the mortgage (sometimes this disbursement was even financed through the loan).

With the entry into force of the new Mortgage Law, these practices are prohibited. The client is free to choose with whom and how to contract these products and look for the offer that, by price and conditions, is the most beneficial.

How product contracting is regulated now

How product contracting is regulated now

This does not mean that the lender is prohibited from offering insurance that leads to an improvement in the price (interest and / or commissions) of the mortgage, but it does radically change the scenario so that this voluntariness is clear.

Now the product is not linked (mandatory), it is combined . For all these reasons, its benefits and risks must be clearly reported and simulated scenarios provided where appropriate. The cost of each product or service is also broken down and at least two offers are separated. A first, with the conditions of the mortgage without the hiring of these products and at least another with the costs and conditions if these optional products are contracted.

Insurance and the new Mortgage Law

Insurance and the new Mortgage Law

Because it is the most important product in this cross-contracting, insurance deserves special mention. Thus, the new Law details that if it is decided to contract with the bank, a series of conditions must be met:

  • Have an annual maturity (eliminating the single premium formula).
  • That the policyholder has the freedom to renew them or change the insurance company.

With all this, the new legislation makes it clear that the cancellation cannot adversely affect the conditions of the mortgage. Even in mandatory insurance, such as property damage , you can present insurance with any entity provided it has the same conditions and benefits.

With all this, the client gains in transparency and freedom of choice, a flexibility that can lead to improved conditions and achieve savings.