Take a second before applying for a loan or using credit. Estimate what the total amount will be, in the long run. A loan or credit purchase almost always gets more expensive than if you would have bought the thing with saved money. Navigating loans and credits can be a hassle, always look for the APR. The Annual percentage rate combines the interest and added fees for easier comparison.
For the bank to grant larger loans, they need something as security. Most common are housing loans and car loans where the apartment or vehicle can be taken away if the loan isn’t repaid.
Cases where the bank doesn’t ask for any item as security are called unsecured loans, also called private loans or blanco loans. Private loans come with a higher interest rate than secured loans since the bank only has your word to go by. Private loans means bigger risk for the bank and therefore comes with higher fees.
When you apply for a loan, regardless what type, a credit check will be taken to estimate your creditworthiness. The credit check is a precaution both for the bank and you, since you wouldn’t want a loan you coulndt handle.
Read more about credit checks here →