Why Did The Government Find Consumer Loans So Popular In Norway
The Norwegian government stringently regulates consumer or personal loans and no credit check loans, all of which are favored ways for citizens to gain extra money when ordinary income is not sufficient for specific needs or wants with life situations.
There is a certainty among the people that their best interests are a priority against potentially risky conditions that could harm their welfare with the government’s guidelines.
In order for a citizen to take a loan in the country, they must be a tax-paying (for three full terms minimum) permanent resident who is employed full-time and no less than 23 years of age. With these credentials, the person can apply for an unsecured personal or consumer as well as a zero credit check loan.
An unsecured or no credit check requires no collateral meaning the individual doesn’t need to put anything of value down on the loan for the bank to hold in case there is a default as they would in the case of a secured loan. However, the loan would then have a lesser amount than a secured loan.
Government Research Looks Into Reasons For Loan Popularity
When Norwegian citizens flocked to get personal loans in 2018, a government-backed research facility (SIFO), also known as the “Norwegian Institute for Consumer Research,” looked into what the people were spending the money for to learn why the loans were becoming such a trend.
The studies conducted intended to find out why individuals would incur high-cost, short-term consumer loans. Many people found the funds beneficial for helping cut expenses in their household by consolidating debt and wiping it out faster.
Others used it to make purchases they otherwise wouldn’t have been able to in any other situation; these seemed to provide an option for some, where there were none otherwise. Their findings revealed the following:
Consolidating debt
In some situations, people use the funds from personal loans to consolidate excessive debt from credit cards. Typically with a credit card, there will be excessively high-interest rates with limits that increase as you use the card, ultimately incurring an exceptional maximum. Once the max is hit, the payments are extreme.
In many cases, people will get another credit card to pay for the maxed card since their income is for monthly expenditures necessary for daily living. The problem is that the card too ultimately reaches its limit since it’s not enough to keep up with the other card. It becomes a cycle of debt.
A personal loan allows the consolidation of these into one payment at a likely much lower interest rate for a shorter period of time to help rid the person of the debt. The condition is that the individual cuts up and closes all the credit cards and does not acquire more credit, ultimately defeating the purpose of getting the loan initially.
In this situation, you can benefit when you find the ideal lender for a consumer loan (look at https://www.forbrukslån.no/ for guidance) and close out the credit. You can also do well if you have other kinds of debt that need to be taken care of.
Emergencies
In the same sense of consolidating credit card debt, some people are caught off guard with expenses above and beyond their income level. Many can’t afford the additional costs with the necessary monthly expenditures.
These can include medical costs, possibly catastrophic events, car repairs, anything that takes away from your comfort level.
Unsecured commercial / personal or non-credit-check loans have the potential for taking a bunch of bills like an accumulation of medical payments, pay those off and leave one payment to take care of over a period of time with no fear of having the expense affect your credit score in the same way that missing medical costs can.
The loans can also prove beneficial if there’s devastation like a flood or damage to the home that insurance might not take care of or completely handle. Fixing a house after a catastrophe can involve demolition, renovation, many repairs, and a great deal of expense, not to mention the labor costs from many professional contractors.
No one ever expects these events, nor is there ever money lying around to make repairs. Insurance adjusters do their best to pay the least, often leaving homeowners having to pay the remainder out of pocket, which can be extensive.
Buying a home over rental properties
Many individuals in Norway would prefer to buy a property over the notion of renting a home. The idea of a rental property gives the impression that you’re wasting your money each month, and ultimately there will be nothing to show for those payments in the future. The problem is the down payment to buy a house is exceptional.
While individuals can pay a mortgage payment in the same way they make their rental payment, accumulating the 15% down that the mortgage companies require to purchase a home is challenging for nearly everyone unless you have an incredible income.
Fortunately, you can take a consumer loan for the down payment. The only issue is ensuring you can afford that payment in conjunction with the mortgage payment plus other monthly expenses, especially if you have a car to pay for.
A 15% of a home’s cost can equate to a significant amount of money. On an ordinary income, these correlate to substantial responsibilities, not including the necessities of food, utilities, and so on that need consideration.
The Norwegian Government Takes Action
These loans were becoming exceedingly popular, but according to the SIFO study, people were becoming trapped in deals with personal loans that involved “ballooning” interest payments that negatively affected their households.
Those attempting to consolidate or pay off debt found they were in no better situation than they were before they took the loan but were actually struggling somewhat more.
In an effort to stop these unsecured loans from becoming a more outstanding obligation than what many citizens could afford with their family income, the government capped what the banks could charge for their interest rates with these types of loans.
The citizens were also advised to study the lenders with care when searching for the ideal loan to ensure the terms and conditions were such that they could afford the repayment.
Each was encouraged to obtain a “Liste av lån uten kredittsjekk” or a List of loans Without Credit Checks to compare the various banks with their terms to make more informed decisions before entering into a contract.
Final Thought
Sometimes there comes the point of desperation when funds are needed, and it’s necessary to take a loan that might have less than desirable terms and conditions. Fortunately, the Norwegian government felt some banks were taking advantage of the citizens who needed these loans to boost what was lacking in their ordinary income base for those things they needed or wanted in their household.
The government took it upon itself to force these banks to level their interest rates back down to a more reasonable level. By taking this effort, Norway’s citizens could then afford the rates.
Still, the action was taken along with providing advice to the people to take some level of responsibility in researching before merely signing on with any lender.
It’s essential to obtain a list of the different lenders in the area, compare their terms and conditions and select the one that works for your particular situation. No one should take a loan in the first place if it creates hardship against the monthly expenditures.
There might be other government-offered assistance programs you might not be aware of, or perhaps you should wait until you’re in a better position financially. It’s genuinely not wise to add to your debt if you can’t afford to pay for it.
