Unsecured personal loans in Norway are on the increase. We take a look at what might be behind the trend.
More Norwegians than ever before are applying for unsecured personal loans, but what is the money actually used for? Because you can use money from a personal loan for any purpose, exact statistics are hard to come by.
However, a recent survey by SIFO, the Norwegian Institute for Consumer Research, sheds some light on where the money goes.
Many use an unsecured personal loan to consolidate other debt. Refinancing several smaller loans, credit card balances and other debts into one single loan can often be cheaper and easier to manage on a day-to-day basis. It is possible to save thousands of kroner per month by refinancing, but the total amount paid can be higher.
Whereas new car sales are often financed via the dealership, consumers often turn to a personal loan for a used car purchase. Some used car sales are via dealerships, but many are made via private transactions through platforms such as Finn.no.
Norwegians spend large sums of money renovating their homes, with a large number of homeowners taking consumer loans to fund the project. Upgrading of bathrooms and refitted kitchens are two of the most common home improvement projects.
Many Norwegians choose to do this with a view to increasing the value of their home, with the idea that the increase covers the cost of the refurbishment. Whether it does or not is up for debate!
17% of those surveyed took out a personal loan to pay for a vacation or extended travel. Given the high interest and sometimes lengthy repayment period, taking a personal loan for travel is almost always going to be more expensive than simply saving for the upfront cost.
Entering the housing market in Norway today is stricter than for many years, with a minimum 15% deposit required. As housing prices have risen in recent years, this can be a large sum of money. Some Norwegians take out a personal loan to cover the deposit amount.
However, the interest rate is significantly higher than with a mortgage, so a good level of income is required to satisfy both the loan and the mortgage payments.