Reports recently appeared in the media about people stuck on a strangulation Loan. For years, these people pay tens of thousands of euros for their Revolving Credit, but hardly repay because the variable interest rate only rises. Piet Sleegers of Freo explains how to prevent these strangulation credits.

It happens to everyone from time to time. You have to replace or purchase something and you have no or insufficient money for it at that time. Then it is possible that you take out a loan so that you can still buy it.

But do not just take out a loan with the first lender. First, take a good look at what different lenders have to offer. What interest are you going to pay? Is that immediately clear?

Often there are low interest rates on the website or in advertisements. Do you also benefit from that low interest rate? Or do you receive a so-called personal rate that depends on your situation and is almost always much higher than what is stated in that advertisement?

Can a lender simply increase “your personal rate” if you have a loan there? If the interest rate increases, you repay less. Then it will take longer before you have repaid the credit. If the interest gets so high that you only pay interest, you will hardly get rid of the credit. Such a credit is also called a ‘strangulation credit’.

When you borrow money, you know it has to be paid back. The sooner you pay back, the less you pay in interest in total. You get rid of your debt sooner and from that moment you have money left for other things.

Therefore, do not immediately opt for the lowest monthly costs. Choose a monthly amount that you can spare and make sure that the term of the credit or loan can be overseen. This way you borrow responsibly. You can also check robocash.ph/articles/loan-in-marikina-city

How does a renovation or conversion loan work?

Most banks apply a minimum and maximum amount for Renovation loans. They often also request an expertise report in advance – where a professional will visit you to estimate the renovation costs – or a detailed specification: a construction plan from the contractor. You usually get a renovation loan more easily than a mortgage, and you don’t have to go to the notary or give your house as collateral. Usually the interest rates are also a lot lower. 

When will I receive a renovation loan?

Just like with a home loan, the bank takes your monthly net (family) income into account. But you must also be able to demonstrate in advance that:
– you own the house;
– the money is intended for a rebuilding or renovation, and this on the basis of a detailed specification or an estimate by the architect;
– professionals will carry out the works.

Also as a do-it-yourselfer you can sometimes get a renovation loan that depends from bank to bank. Although there are often more conditions attached. In some cases, for example, you must demonstrate with an invoice that you have actually purchased the necessary materials and raw materials yourself. You can read more about online loans at robocash.ph/articles/how-to-use-dragonpay

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