Guide to Online Loans in Norway
Loans are in their simplest form an agreement between a lender and a borrower about the loan terms. The lender has the funds available and borrows them under specific criteria, often through an interest rate of some sort 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.
As the agreement is made, certain aspects like amount, runtime (how long the period for returning the money is), and interest rate must be agreed upon. This is often done by banks and lenders to consumers, where banks/lenders have the funds available and lend them to their customers under a specific contract.
Loan example:
a loan in the amount of 100 000 NOK, 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 NOK
the amount is split over 96 terms (months), with a monthly payment of 1377 NOK (fees included)
Usually, you would need to consult 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 loans in Norway.
While most traditional banks require a thorough investigation of your financial standpoint regarding monthly income, 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 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 Loans (Forbrukslån) and Mini Loans, also known as Fast 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
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 NOK for 5 years. The repayment amount is calculated based on how much money you withdraw from the available credit line. 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.
Pros and cons of loans and credits in Norway
Pros
Loans that suit your situation.
Allows you to realize your projects.
Transparency throughout the entire process.
No loan justification.
Convenient and flexible.
Cons
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.
