Under a loan you understand an amount that is given by a party to another party.

 Borrow money from a bank

An important – inseparable- condition of this is that it is paid for later. Often interest and any other costs are added. To distinguish the original amount of the new sum plus interest and incidental costs, you call the first amount the principal sum. It may be that you agree not to repay the loan, together with the interest and the other costs, in one go. You then pay off the loan in parts. Do you still keep a part of the original amount that has not yet been repaid? This is what you call the pro-residual principal.

Borrow money from a bank

You usually borrow money from a bank. The person who gives you the loan, you call the lender. The bank is in possession of a lot of money that others have entrusted to them. These people all receive interest on the amount that they have given away. Banks can pay interest by, for example, investing or lending the money that they hold. They thus benefit from returns.

Different types of loans

Before you take out a loan, it is useful to read about the different types of loans that are available. For example, you have mortgage, personal and subordinated loans, securities credit, revolving credit and loan credit and a bridging mortgage.

Mortgage loan

With this loan you borrow money to buy a house. This house is then your collateral (the bank can demand your collateral if you do not meet your obligations). You pay interest and pay off your loan at the bank.

Personal loan

With a personal loan you make it possible for yourself to purchase various items (which are not dwellings). The interest you have to pay on this will be higher than the mortgage interest. Because you now have no collateral, the bank takes a greater risk.

Subordinated loan

This loan is mainly taken out by companies. He will not be refunded until other creditors have been paid. The bank again takes a greater risk here, which increases interest rates.

Securities credit

This is a loan against securities collateral. Think of stocks, bonds, forward contracts and options (rights that are exchangeable for a certain financial value).

Revolving credit

With a revolving credit , there is no question of an amount that is fixed. Depending on your own needs, you withdraw money and deduct it.

Flash credit

This personal account has a term of (maximum) three months. The Netherlands Authority for the Financial Markets (AFM) supervises such accounts. If you pay off the loan outside the term, you have to deal with high costs.

Bridging mortgage

This loan is a specific period in which you need the money. An example of this is the time between buying a new house (must be paid) and the sale of your first house (the money for this will only be paid later).

If you are planning to take out a loan between two friends or family members, you will usually not have to deal with interest (except when it comes to large sums of money). Tip: when lending a lot of money, you must document your rights and obligations in writing in an agreement.

Borrow and time

Time plays an important role in the process of taking out a loan. Borrowing is actually the opposite of saving. If you save, you postpone buying something. If you now have money left, there is a big chance that you will save this in order to spend it in the future. When you are borrowing, you want to spend money right now that is not yours yet. By taking out a loan, you can currently make use of money that you expect to earn / earn in the future (and keep it).

Buying a house

A good example of the above is taking out a mortgage loan with which you buy a house. You do this because you can not (and want to) wait half a day before you have saved enough money to own a house.

Borrowing irresponsibly

If you are not entirely sure that in the future you will actually earn more than enough (more than what is necessary to provide for your living and other necessary things), it becomes irresponsible to take out a loan. In conclusion: if you borrow, take your future (not yet existing) income to the present, while by saving the income you now have, you shift to the future.