Glossary for those applying for a loan


Most of us are at one time or another in a situation where we need to borrow money either to buy our own home, new car or other consumer goods. Today we can cover everything from mortgages to car loans and many different types of consumer loans. Deposit loans and car loans are characterized as loans secured by a mortgage in the home or car. Consumer loans (norgelå / best-consumer loans-of-the-day) of all kinds (for example, small loans, SMS loans, micro loans, cash loans) are so-called unsecured loans. It is these unsecured loans that are gaining in popularity among Norwegian consumers.

Popular consumer loans

Popular consumer loans

The Norwegian consumer loan market has increased in line with popularity. Today, you can therefore apply for consumer loans from traditional lenders such as banks and from more non-traditional lenders, such as large stores selling home appliances. The application process is a bit different depending on where you want to take out a consumer loan, but the common thing is that it usually doesn’t take very long. The requirements set are few and easily affordable. The remaining requirements are age, a certain amount in annual income and no payment remarks.

When we consider applying for, seeking and paying off different consumer loans, some foreign words may appear to us consumers that can make the process more difficult, or less understandable and clear. In this article you will get a glossary of explanations of words and concepts that are useful for you who are going to have a loan.

Glossary for loan seekers

Glossary for loan seekers

What is a creditor? A creditor, also known as a claimant, is a person who is entitled to a specific performance. The most common is that this benefit to which the creditor is entitled is a monetary amount, but the benefit may also be other goods and services. Furthermore, a creditor can be a person or a company that specializes in claiming performance.

Here are some examples of what a creditor is:

  • If you borrow money from a bank, then the bank is the creditor.
  • If you buy food, clothing, make-up or other goods and products in a store, the shop is the creditor.

What is a Debtor? A debtor is the opposite of a creditor, which means that a debtor is a person or business that owes a monetary benefit, or other goods and services. A debtor thus owes a performance to a creditor. The term debtor is only used in contexts where there are long-term relationships between a customer and a supplier, such as when you as a customer take out a loan from your bank then as mentioned the bank is the creditor and you are the debtor.

What is a Debt Register? A debt register is a new phenomenon on the Norwegian market, and the business came into effect from 1 July 2019. A debt register is a register where it is registered how many loans you as a consumer have. In the first instance, this applies mainly to all types of consumer loans. The reason why such debt registers have arrived is that the authorities are concerned that Norwegian households are increasingly taking up consumer loans. In total, Norwegian households have a consumption debt of more than $ 100 million. The purpose of debt registers is to prevent consumer debt from rising and that Norwegian consumers end up in financially difficult situations.

A debt register will make it easier for banks and other lenders that you do not have or take up more debt than you can repay, including a 5% increase in interest rates. If a large amount of debt is registered in your name, this can have consequences if you are not allowed to take up more in consumer loans or because you are not granted a mortgage or car loan. Basically, debt registers should result in more responsible lending practices.

What is interest? Studies show that many Norwegians do not know what interest rates are. This is worrying many consumer economists because interest has a huge impact on your loan. An interest rate is simply a form of rental price that a lender takes to lend you money. Interest rates are usually expressed as a percentage, and we distinguish between nominal and effective interest rates.

What is an effective interest rate? It is common to distinguish between effective and nominal interest rates. An effective interest rate has all the costs of a loan. To put it another way, the effective interest rate includes both the nominal interest rate, termination fee, establishment fee also further. The term of the loan and the number of annual installments are also included in the effective interest rate.

Thus, the effective interest rate is the total cost amount associated with a loan, and therefore the effective interest rate will always be higher than the nominal interest rate. Therefore, you should be very aware of the effective interest rate that comes with the loan you need and want. It is the effective interest rate that tells you how much the loan together will cost you.

What is a nominal interest rate? The nominal interest rate on a loan is only the interest rate itself, ie the rental price and nothing else. A nominal interest rate is synonymous with a basic interest rate, and unlike the effective interest rate, the nominal interest rate does not include the other costs associated with a loan. Banks and other lenders calculate the nominal interest rate differently, but the most common method of setting the nominal interest rate is to sum the monthly interest rate.

Most of us often see ourselves completely blind at the nominal interest rate when comparing different loan offers. We do this because it is the nominal interest rate marketed by banks and other lenders, but it is recommended that you are more concerned about the effective interest rate because it is the one that shows you the total cost of your loan.

What is a Borrowing Framework? A loan limit is defined as the maximum total amount that banks are willing to lend to you when you apply for a mortgage loan. A frame loan is also called for consumer credit, flexible loan, office credit, flexible credit, loan credit and loan with loan limit. It is therefore the banks that determine how much credit you have available. One advantage of such frame loans is that you can save some interest costs, and frame loans are recommended for people who have and control their finances.

Mortgages are also less expensive than consumer loans because you only pay interest on what you spend the money on.