Buying a home but unsure how to finance that much-needed bathroom renovation or to install solar panels? A personal loan could be the solution, now interest rates are plummeting.
Personal loans are becoming increasingly popular in the Netherlands, particularly now the interest rate has dipped under 4% with some providers.
The Nederlands Krediet Collectief, for example, has cut its interest rate for the second time this year, offering customers a record low rate of 3.9% on a 10-year home renovation loan of €50,000.
‘Doing up your home at the current low interest rates, combined with the tax break, makes it extremely attractive to opt for a personal rebuilding loan at the moment,’ says Rick Hartsuiker, director of personal loan provider Nederlands Krediet Collectief.
‘The current interest rates on loans offered by retail banks remain systematically high. Combining loans and switching to a lower fixed interest rate over a pre-determined period gives consumers more perspective.’
Figures from the Dutch loan company association VFN show that loans to pay for conversions and home renovations are by far the most popular among consumers, who are faced with high bank charges if they want to extend or increase their current mortgage, or take out a second one.
This is particularly the case with the current drive towards making homes more energy efficient by boost levels of insulation, installing solar panels or replacing gas powered central heating systems with heat pumps.
Some local authorities are offering home owners loans and grants to boost energy efficiency and the government has just announced plans to give subsidies of up to €10,000 to home owners who really make an effort to go green – payable after the work has been carried out.
But if your local council has not yet taken that step, and it is too complicated or too expensive to increase your mortgage, a personal loan is an option. The Nederlands Krediet Collectief, for example, has a special GreenLoans product for home owners wishing to go green, with loans available from €5,000.
Cars and boats
Of course, you can do more with a personal loan than renovate your home or boost its energy efficiency.
The Dutch may be known as people who like savings, but one in five will also take out a loan make a major purchase, such as buying a car, caravan or boat, according to figures from the VFN.
Nevertheless, before you get to carried way about that sports car, Hartsuiker says people should think really hard about whether this is the best solution for them. After all, it is usually cheaper to buy something with savings rather than borrowed money.
Always check too if the loan company requires you to take out insurance to cover your debt should you die before paying it back, and if you can make extra repayments without being fined.
For purchases which cannot be delayed, personal loans can be a good solution. ‘However, don’t think you can borrow money to pay off other loans,’ the Nederlands Krediet Collectief’s Hartsuiker points out. ‘And make sure you have a proper plan for the repayments.’
One tip is to try saving the amount of money you would have to repay for a couple of months and see if you can manage financially. ‘A personal loan,’ says Hartsuiker, ‘is not something to take on impulsively.’
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