Forbrukslån – Understanding the Basics of Consumer Loans

It goes without saying that human needs are unending; there would always be something that requires money to sort out. While financial prudence can help an individual lead a comfortable life, plans do get scuttled by unforeseen circumstances. When that happens, a financial boost or aid is needed.

This boost or aid can come in different forms but the most common thing that most people would fall back on is taking out a loan. You could get a loan from friends or family or from a financial institution. One of the most common forms of loans that individuals or families take out is consumer loans.

Consumer loans are any form of credit made available to a consumer by a creditor (bank or financial institution). This is money loaned to an individual to take care of some expenditures. In this article, we would help you get a basic understanding of consumer loans so that you would know what to expect in case you decide to take out one.

Two Broad Categories of Consumer Loans

There are two main categories of consumer loans and they are secured loans and unsecured ones. These are determined by whether the loan is backed by collateral or not. Let’s briefly look at both:-

Secured Credit

This type of loan is one in which the borrower presents an asset that would cover the cost of the credit given in case the borrower is unable to repay their debt. It is an ideal alternative for people who need a large sum of money. This is because the fact that there is an asset that can cover for any default reduces the risk for the lender.

Due to the reduced risk for the lender, the borrower can get higher amounts to pay back over a longer period and with lower interest rates.

Unsecured Credit

As you might have guessed, this is the opposite of secured credits. The borrower in this case, does not have to present any collateral. This in essence means that the lender faces a higher risk in the event of a default in repayment. For this reason, the amount one can get from this kind of loan is usually lower than with the secured type.

Additionally, the interest rate is usually higher and repayment period shorter. But most times these types of credit are usually approved faster. That’s why they come in handy for emergencies.

Types of Consumer Loans

The different types of this loan include credit cards, mortgages, auto loans, personal loans and student loans.

Credit Cards

This is a plastic or metal card that is used as a financial instrument. It is issued to consumers by a financial institution or a bank. Basically, this card is used by the holder to make purchases from sellers or businesses that accept them. It allows the holder to make purchases with it and then pay back the issuer on or before a date agreed upon.

There are terms and conditions that apply and also interest that accrues to the issuer over time. Generally, credit cards are unsecured line of credit since they are not backed by any collateral.


A mortgage is a loan that’s taken out to buy a home. This type of credit can also be taken against the value of a home already owned. Mortgages are usually backed by collateral therefore they are secured loans.

Most often the house is usually the collateral and the lender can take possession of it in the event of a default. Click here to find out more about mortgages.

Students Loans

These are credits given to students to help finance their tertiary education. These loans cover tuition and all expenditure that pertains to the schooling of the recipient. There are also terms and conditions that apply for this type of credit line.

One of these terms and conditions state that fulltime students must have someone to sign as a surety for the loan. This person would also pay the fees and interest while the student is schooling. The student would start repaying the loan when they graduate. For part time students however, they have to start repaying the debt even while schooling.

Auto Loan

As the name implies, this is money advanced to an individual to enable them buy a car. This is a secured loan because the car is used as the collateral. In the event that the borrower cannot or does not repay as at when due, the car is repossessed by the lender.

Personal Loan

This type of credit is one in which an individual receives money to meet pressing needs. These are not usually restricted to any project such as a mortgage or car loan would. It can be used for whatever the borrower desires.

Factors to Consider Before Applying for a Consumer Loan

Before you go ahead to take out a loan, there are factors to consider and they include the following:-


What do you want to use the money for? You need to have a clear cut need which we advise must be important. It wouldn’t do to take out credit for frivolous issues.

What Amount Can You Repay?

When you have confirmed that the purpose for which you need the money is valid, the next thing to consider is repayment. What is your income and expenditure and how much credit can you repay without jeopardizing your finances?

Can You Meet The Terms And Conditions?

Many people just accept any offer without reading the fine prints. Every financial institution is in business to make profit. No one sets up shop to be Santa Claus!  Ensure that you read the fine prints to know which lender has the lowest interest rate, the duration for repayment and the penalty for defaulting at any point. You can visit, or like they say in Norwegian, besøk forbrukslå for more information.


Understanding the basics of consumer loans is very important for everyone. We have provided some information and we believe you now have an understanding of what it all entails. We advise that you always seek professional financial counsel before you take out substantial sums in consumer loans.

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