Guide to Online Loans in Norway
Loans are in their simplest form an agreement between a lender and a borrower about the loan terms, a.i. how the money will be borrowed and repaid. The lender has the funds available and borrows them under specific conditions, usually through an interest rate of a certain amount and some additional fees. This is considered the payment for borrowing the money and is paid back monthly, quarterly, biannually, or annually by the one who borrowed the money.
When a loan agreement is made, things like the amount of money, how long it will take to pay it back, and the interest rate must be decided. Banks and lenders often do this for their customers, lending money based on a set contract.
Loan example:
a loan in the amount of 100 000 kr, with a runtime of 8 years (96 months), and an interest rate of 7%
with fees included, the final repayment for this loan is around 140 000 kr
the amount is split over 96 terms (months), with a monthly payment of 1377 kr (fees included)
In the past, one would have to make a visit to a local bank to apply for a loan, but as online banking has become more and more popular, there are several lenders offering convenient online fast loans in Norway.
While most traditional banks require a thorough investigation of your financial standpoint regarding monthly income, credit score, budgets, last year’s spending and much more, online banks only require minimum information, which makes them more accessible. Some online lenders might also offer lower interest rates since they are not burdened by paying rent for a physical subsidiary in the area.
Requirements to apply for a loan in Norway
Be over 18 years old. Some banks might have a minimum age requirement of 20 or even 25. This high age limit often applies for bigger loans (such as mortgage loans), so there are still plenty of loans available to those who are only 18.
Place of residence in Norway. Generally, you must have also lived in Norway for minimum 3 years. Some financial institutions, in connection with bigger loans, might require a Norwegian citizenship and/or a Norwegian identity number as well.
Stable income source. Banks offer the loans on the basis of getting back the money after the runtime has passed. If you have no income source, you cannot pay back your loan with the added interest, which in turn means you will not be able to take a loan in the first place.
BankID - a personal electronic identification system. This is necessary for identification, as well as for signing the documents online.
As a general rule of thumb, the borrower must not have a total debt that exceeds 5x the annual income. The borrower must also be able to withstand an interest rate increase (on the total debt) of at least 5%.
Types of loans in Norway
Here is an overview of the credits and loans offered by online lenders in Norway, which you can also find right here on Moneezy:
Classic loans
In Norway, you can generally distinguish between two loan types: Secured Loans (Lån med sikkerhet) and Unsecured Loans (Lån uten sikkerhet).
Most loans offered by online lenders in Norway are unsecured loans, which are Consumer or Personal Loans (Forbrukslån) and Mini Loans, also known as Fast or Quick Loans (Smålån). These are very similar, with the main difference being in the amount you can borrow. In both instances, you apply for a loan of a certain amount, and choose a repayment period. Note that the runtime for personal loans in Norway usually cannot exceed 5 years.
These loans can be used for a lot of different things. A smaller loan amount can be used to cover an unexpected expense that has come through, an emergency that must be taken care of, or invested in an item you have wanted for years. A bigger loan is more suited toward initiating start-ups, purchasing a vehicle, or bigger projects, such as energy optimization or renovations in your home. The possibilities are endless, which is why consumer loans are among the most common loans.
»»» Read also out post about home renovations loans.
Special loans
A Consolidation Loan (Refinansieringslån) is a type of loan that allows you to combine several smaller loans into one big loan, to avoid paying a high interest rate for several loans at a time.
Consolidation loans are especially useful to consumers that have taken several small loans and are now burdened with several payment dates and different interest rates.
Lastly, we have Overdraft (Kredittlån), where you have a set amount available on an account for an agreed period of time, e.g., 100 000 kr for 5 years. The main advantage of this type of credit is that the interest rates is only applied on the used amount, not on the entire amount available. In many ways, it is very similar to a credit card, but the biggest differences are that this type of loan can both be secured or unsecured and often the interest rates offered are better than for a traditional credit card. This is especially useful when conducting a big project, for example, a house renovation, where unexpected expenses can come out of nowhere.
One big benefit of credit cards (Kredittkort) in Norway is the long grace period, which can extend to 50 days. The grace period is the number of days you have to pay back what you’ve spent. During the grace period you are not being charged any interest. As long as you pay off your balance within this time, you won’t have to pay extra fees for borrowing the money.
Pros and cons of loans and credits in Norway
Loans that suit your situation.
Allows you to realize your projects.
Transparency throughout the entire process.
No loan justification.
Convenient and flexible.
Lifestyle inflation, where you spend more money because you have more money.
Debt, if you are not careful with your budget.
Reckless spending.
Extra fees if you do not comply with payment dates.
A loan is a commitment and must be repaid. Ensure you have the ability to repay before making a commitment.
Our take on online loans
If you are not realistic and thorough in your budget planning, you can end up having trouble repaying your loan. Furthermore, if you apply for a loan to spend on devaluating assets such as technology, fashion, and trends, you are not looking at investments, but rather at reckless spending, something to avoid using loans for. If you keep these risks in mind when applying for a loan, they can be a great source to realize projects. Being mindful and intentional about your loans is the most important aspect.
Place close attention to the APR. In Norway, this is measured with the eff. rente (Effektiv Rente).
Always compare loans thoroughly based on factors relevant to you.
Be mindful when choosing the amount. If it does not fit in well into your budget, you might have trouble keeping up with payments.
Now that you have read more on the subject...Want to take another look at the loans we offer? Press the "Return" button to go back to our loan comparison tool.
