Every time that I stop by my bank or credit union, it feels like they’ve got some new type of loan that I should totally apply for that day – especially since my approval rates are super high at their branch. Obviously, I approach these loans with a certain amount of caution – after all, I’m not exactly always in the market for borrowing money, and without more information, I tend not to want to dive right in.
I think that most consumers are the same way, really. Who wants to sign onto a deal that they don’t know anything about, right? Well, today I want to help you become informed consumers when it comes to a new type of loan that I’ve seen cropping up in some of the international circles. They’re called blank loans, and I was really intrigued the first time I heard about them.
As it happens, they’re mostly just another way to say, “consumer loans,” just with an emphasis on the fact that they don’t require collateral. Maybe a bit underwhelming in terms of all the different things that it could have been, but I can appreciate that there’s a new and more catchy way to refer to them. The other way is a bit of a mouthful, after all, and it’s much easier to remember “blank loan.”
Still, though, are there any other differences? What else should we know about them that sets them apart? A lot of it really will come down to which bank or financial institution that you decide to work with, but I’ll do my best to cover some of the basics as well. Thankfully, there are some articles out there that can help the uninitiated, so don’t be afraid to check them out before you continue here.
Consumer Loans: What You Need to Know
Often, we see conflation between “consumer” loans and “private” loans. While they might sound similar on paper, the latter is actually one of the types under the vast umbrella that is the former. Make sure you keep that in mind as you consider the type of loan that you need – there are a ton of different types of consumer loans.
The defining facet of them is that they are intended for individuals or small groups as opposed to a business. After all, we have a different term for those: business loans. There are some pretty big differences in terms of collateral as well as interest rates between the two, so just bear that in mind as we continue.
These are all considered to be credit agreements, which is just when one party borrows money from another with the expectation that it will be paid back over time. That initial amount is called the principal, and one of the biggest additional fees is known as the interest rate. Essentially, that’s what the lender charges the borrower for the privilege of taking out the loan. It’s a percentage of that principal amount.
Student Loans
As I alluded to above, there are a few different types of consumer loans. I’ll start off with one that isn’t overly related to our topic at hand today, but is still worth mentioning. Student loans, as you can learn about on this page, are not all that common in places like Europe. In North America, though, they’re the main way that young adults are able to afford their education.
That means that most people who are entering the work force already have consumer loans, even if they don’t really know that this is what they’re called. For that reason, it’s a good idea to at least be familiar with them – chances are, you know someone who’s dealing with these.
Mortgages
Returning to more familiar territory for those of us on an international level, mortgages are how most folks purchase homes these days. A bank or other sort of financial institution (usually a credit union) will pay for everything except the down payment on a property, and then the borrower ends up paying that back over an extended period of time. A lot of mortgages can last upwards of twenty or thirty years.
Naturally, this makes them a pretty big deal. It’s debt that sits with a person for decades, and the fact that the interest rates can fluctuate over time only adds to some of the stress involved. Thankfully, though, there are options for people struggling with them. That’s called refinancing and is a topic for another day.
Lines of Credit
As far as the most common type of blank loan goes, that would definitely go to lines of credit. You’ve probably heard of them, seeing as most of us know them as credit cards. Undeniably, they’re something instrumental in helping most people build up their credit scores as well as being a valuable tool in emergencies.
While they are quite popular, there are still some caveats to be aware of. Most of them do charge interest, so you can end up stuck in a lot of debt if you’re not careful. In addition to that, since it’s a revolving door of credit, it’s pretty important not to spend your entire balance at once if you do intend to use the card in emergencies.
With that said, though, they remain an instrumental part of most adult lives. Because of this, it’s a good idea to get yourself as knowledgeable on them as possible. While it’s not the main focus of today’s article, I do hope you take my words to heart here.
Private Loans
Now, when most people hear “consumer” or “blank” loans, this is the type that they think of. You can find some examples of them here, forbrukslån.no/blancolån/, if you’re curious about what they look like. While that is a Norwegian bank, I do think it’s important that we don’t limit ourselves to just looking at financial institutions or lenders in our own country. Sometimes, you can find different interest rates if you look externally.
Moving back to our main focus, though, what exactly are private loans? Sure, they’re a type of consumer loan, and follow all of the conventions of those that I’ve already mentioned. However, let’s dig a bit deeper into them and how they actually operate.
One of the main things that sets them apart from the other types of loans that we’ve discussed is the fact that they can be used for a much wider variety of reasons. In fact, I would venture to say that they’re rather flexible compared to the others that have been discussed (besides perhaps the credit cards). Unlike something like a mortgage or auto loan, you don’t have to stick to one specific way of utilizing the funds that you borrow.
That’s probably what makes them so popular, really, considering you can use them for just about anything you want (so long as it is allowed within the contract that you sign when you first are approved for the loan). I would venture to say that’s where the term “blank” loan came from in the first place, considering that you’ve got a blank slate with them.
Some popular reasons to take them out are things like paying for vacations, house renovations, or even weddings. Basically, anything that might require a sizeable down-payment that most consumers would find difficult to gather all at once are a motivating factor for those who get blank loans. Just know that the interest rates for them tend to vary a lot more than the others, so don’t be afraid to shop around at different lenders to find the one that suits you best.
Are Blank Loans Safe?
While the biggest crisis period of the covid 19 pandemic is well behind us, I know that a ton of people are still on high alert for financial scams – after all, predatory companies and internet scammers seemed to really come out of the woodworks during the height of the pandemic. That’s why I’m here to assure you that these are safe, so long as you are borrowing from an accredited financial institution.
Online lenders are not inherently bad or untrustworthy, which I know is a gut instinct that many of us have. You can always look up reviews or check out other secondary sources to figure out whether the one that you’re considering is legit or not. It was this reason that got me looking at the international options that are out there too, believe it or not.
So, rest assured, blank loans are totally safe – just as safe as all consumer loans. As long as you’re confident that you’ll be able to make your repayments on time, there’s little reason to hold back if you find yourself in need of a bit of extra cash to complete an important project or to have the wedding of your dreams. Just remember that your credit score will have an impact on what interest rates that you are offered, as well as determine whether or not you are approved in many cases.