What is a Flexible Loan?
There are many types of loans on the market, and in recent years there have often been advertisements from banks and finance companies offering flexible loans . This is a type of consumer loan that gives customers a more flexible repayment scheme.
Ordinary consumer loans have a repayment plan that is set at the request of the loan applicant. One can, for example. take out a loan without a security of 50,000, – and pay down the entire sum over 5 years. Then you pay interest, installments and fees every month, and the installment amount to pay is the same all the time.
Important difference from other unsecured loans
A flexible loan is given as a loan framework, and you decide for yourself how much you want to pay off each month. If you have bad advice for a period, you can choose to only pay interest and fees on the loan amount you have used. In this way, one can defer to pay down the loan for a period, so that the maturity is extended. This is also called interest-free loan.
A flexible loan has another difference compared to a regular consumer loan. For example, has been granted a loan limit of USD. 30,000, – and spent the entire sum, you will not have available money to withdraw in the account. After a period of time, you may have paid in USD 10,000, and then this sum is available again to the borrower – without the person having to submit a new loan application.
With a regular consumer loan, one must reapply to increase the loan amount if needed. This is avoided with a flexible loan.
A flexible loan allows the borrower to choose the repayment period himself. One can pay less installments in periods and more in other periods. As mentioned, you can only pay interest and fees on the loan for a period of time.
Benefits of the loan
The main advantage of a flexible loan is that the bank gives you more freedom during the repayment period than with a regular consumer loan. You can increase the term of the loan at your own discretion, as you are only obliged to pay a minimum amount consisting of fees and interest each month.
In other words, it becomes an installment-free loan indefinitely. Another advantage is that a flexible loan is given as a frame credit, and you can borrow again within the limit when you need it. This means that you have money available on account as soon as you have repaid the loan. You do not have to ask to increase the loan.
One disadvantage of having a flexible loan is precisely this freedom relating to the repayment period. It requires that you are strong-willed and set up your own repayment plan. If you only pay the minimum amount of fees and interest, this will be a very expensive consumer loan over time.
Another disadvantage is that a flexible loan often has a higher effective interest rate than regular consumer loans. Therefore, you have to pay extra to get the repayment freedom.