If you want to borrow wisely, you must take the following into account.
Does the loan match your income?
The costs of a loan come back every month for the entire duration. So you have enough money left over for other important things. If in doubt, it is best to make a monthly budget. An overview of your total monthly income minus all fixed costs. If you need help, go to the Nibud website or ask us for help. You should also look to the future. What does your income and expenditure look like? Is your income increasing? Are your children going to study later? These are things that you have to take into account.
The best is a duration that is just as long as the lifetime of the product for which you borrow. The duration is usually expressed in months. If you borrow for a car that may last for 7 years, a 10-year loan term may not be wise. You are then still paying while you no longer have the pleasure. It is more sensible than to borrow less or to take a shorter duration. The disadvantage of a shorter duration is that the monthly charges are higher. On the other hand, with a longer duration you have lower monthly costs. A good middle ground is then the best.
Interest and other conditions.
Lenders are required to state the effective interest rates. This is the actual interest that you actually paid. There are also statutory maximum interest rates that may be charged. For lower amounts, these maximum interest rates are higher.
Is there a death risk cover?
Are you being pushed to take out an expensive disability or other insurance policy? You are not obliged to do anything as long as it is not on paper. These matters are therefore usually not mandatory. Is it possible to repay early without penalty?
Borrowing and private tax benefit.
(Mortgage) interest for a home that serves as your principal residence is deductible. All other interest NOT! Mortgage interest for a second home or holiday home is also not deductible. If (mortgage) interest relates to something else, such as a car or boat, then this is NOT deductible (anymore). If you borrow money and use this for a renovation or improvement of your owner-occupied home, the interest on this is deductible. If you use a part for something else, that part falls under consumer interest. This is no longer deductible from 2001. So don’t be fooled by unclear advertisements!