All You Need to Know About Forbrukslån (Consumer Loans)

One of the popular methods of purchasing goods and services is the use of consumer loans. Let’s say you want to buy a new car or go on a vacation but do not have all the money you need. A consumer loan can help you to strike out everything on your bucket list. And the good part is that you can pay in installments without making a down payment or collateral.

Most loans fall under the consumer loan category. Before you apply, you should know how they work. Keep reading to find out all you need to know about consumer loans.

An Overview of Consumer Loans

Consumer loans, also known as Forbrukslån in Norway, could be open or close-ended. The open-ended category relates to revolving credit while the close-ended deals with installment payments.

Open-Ended Credit

You can make purchases continuously with this type of loan, but your spending must not exceed a certain limit. Also, you must make a minimum payment periodically to gain access to more funds. The downside of this loan is that the interest rate goes up if you do not pay in full at the end of the billing period. There could also be penalties and other fees.

Typical examples of open-ended credit include the following:

Credit Cards

These are bank cards such as Discover, Visa, and MasterCard. They make your shopping experience pleasurable as you can quickly get funds to purchase items from the comfort of your couch. Any amount you pay back at the end of the month becomes available for borrowing in the next month. Additionally, the outstanding balance attracts its own interest rate and late payment charges.

Travel Cards

As the name implies, travel cards facilitate trips. There are no interests or extra charges, but you must pay the loan in full at the end of the month. An example is the Carte Blanche.

Retail Store Cards

Retail stores and other businesses issue these cards to their loyal customers to enable them to make purchases when they are low on cash. As a result, you can only use the card to buy from the issuing company or store and then pay back the amount with interest at your pace.

Close-Ended Credit

This type of loan is structured. It has a fixed monthly payment, interest rate, and repayment term. Examples are mortgages and car loans. The lender has partial control over the home or car until you pay back in full. And if you default, the lender can repossess the property.

Where Can You Get Forbrukslån (Consumer Loan)?

You may need extra funds at any time, whether it is for a planned project or an emergency. That’s why you need to know your options in advance. So, here are some important sources of consumer loans:

  1. Family and Friends
  2. Insurance Companies
  3. Commercial Banks
  4. Credit Unions
  5. Sales Finance Firms
  6. S & L Associations
  7. Consumer Finance Firms
  8. Pawnbrokers

Family and Friends

This might be your first port of call when you need money. But it is important to keep it strictly business to avoid having problems that may ruin your relationship with your loved ones. Also, if the news of your borrowing gets into the ears of the internal revenue service, you may be forced to pay interest to the lender. You can read this article to get tips for borrowing from family members.

Insurance Companies

If you have life insurance coverage, you can take out 80% of your policy. After your demise, the company will subtract the balance from what is due to your beneficiaries. Therefore, you may not have to pay back the loan. To avoid compounding issues for your beneficiaries, ensure you pay back the interest since it is usually lower than other credit sources.

Commercial Banks

Commercial banks have access to other people’s money. So, they lend at interest to credit-worthy borrowers (people who can pay back within the stipulated period). In addition to consumer loans, they issue housing loans and credit cards.

Credit Unions

They are cooperatives formed by people with similar interests or colleagues in a particular organization. Because of their non-profit status, their interest rates are low and loan terms are quite favorable compared to other sources. If you are a member of one of these unions, they can deduct the loan in installments from your monthly paycheck.

Sales Finance Firms

Manufacturing companies have sales finance units that finance big purchases such as furniture, cars, appliances, and electronics over a long period. Even healthcare outfits offer such services. For instance, if you want to undergo a dental procedure but cannot afford the overall cost, the financing firm can assist with the payment. You will make monthly payments to the firm, not the merchant or physician.

S & L Associations

S & L is an acronym for savings and loans. Such associations specialize in the following:

  • Personal loans
  • Home improvement
  • Real estate
  • Tuition loans
  • Savings account-backed loans
  • Second mortgages

They get funds from depositors, which makes their interest rates low. But this also depends on the amount of money you want to borrow and the repayment period. Additionally, S & L associations request collateral because they prefer to deal with trustworthy people.

Consumer Finance Firms

If you do not have a credit history, a consumer finance firm can lend to you without requesting collateral. Because their customers are people who may be unable to access funds from other sources, their interest rates are high. However, you can get the money the same day you apply for it.


The last on this list are pawnbrokers. They do not ask any questions before giving you a loan, and that is why they charge high-interest rates. All you have to do is present a property, which they will value, and give you a portion of that value.

Making payments on time ensures you get back your property. Otherwise, the pawnbrokers will sell it. However, you can plead for an extension.

Beware of Loan Sharks

Although loan sharks are one of the sources of consumer loans, they shouldn’t be on your list at all. They are illegal and charge exorbitant interest rates and penalties for late payments. Also, they do not offer a longer repayment period, so you might become overwhelmed with huge debts within a short timeframe. To crown it all, they use violent means for debt recovery, the more reason you should avoid them.

How to Choose a Loan Offer

Having established the fact that various loan sources exist, you should know how to select a reasonable offer from the rest. Below are some key factors to evaluate.

  1. The interest rate: If it’s high, expect to pay more.
  2. The repayment period: This determines the timeframe for paying back the loan.
  3. Charges: This varies from one lender to another and is common with revolving loans.
  4. Penalty for early repayment: Some lenders will penalize you if you pay too early.
  5. Collateral: Loans like mortgages and car loans require collateral.

What Documents Do You Need to Apply for Consumer Loan?

Lenders require a list of documents before accepting to offer you a loan. They include the following:

  1. Application
  2. Identity Verification
  3. Address Verification
  4. Proof of Employment
  5. Credit History and Credit Score

Completed Application Form

The first step to accessing a consumer loan is filling out an application form. The process is different for each lender. But the basic information required is your personal info, the loan amount, and why you want the money.

Traditionally, financial institutions have paper applications, but many lenders now offer online applications and give instant responses. However, some may have to call you over the phone to confirm certain details before approving or rejecting your application. You may want to check out Billiglå to get important tips for your loan application.

Identity Verification

First, you must be over 18 years old to qualify for a loan. Second, you have to provide a government-issued ID to prove your identity. This also guards against identity theft. Examples of government-issued IDs are:

  • Passport
  • Birth certificate
  • Military identification card
  • Citizenship certificate
  • Driver’s license

Address Verification

Lenders want to be sure that they are not giving their money to someone who doesn’t have decent living conditions. The following documents are useful in address verification:

  • Utility bills
  • Tenancy agreement
  • Voter’s card
  • Bank statement
  • Any receipt that contains your address

Proof of Employment

Being employed signifies that you can pay your debts. You will require a letter from your employer to prove this. But if you are self-employed, you must provide recent bank statements and copies of your tax returns for the last 2 years. If you have multiple sources of income, do yourself a favor and include them to prove that you can afford the loan.

Credit History and Credit Score

You need a good credit history and score to prove that you can pay your debt on time. In fact, a high score increases your chances of getting approval as well as a favorable loan term such as a reduction in rates.

What Could Disqualify You from Getting a Consumer Loan?

Your application might be met with disapproval for several reasons. Chief among them is a poor credit score. The lender may also disqualify you because your income status does not match the loan amount you requested.

Here are a few things to do if you are disqualified for a consumer loan:

  • Check whether you made mistakes in the application
  • Be sure you provided the right information in your supporting documents
  • Reduce the loan amount
  • Get a co-signer
  • Search for another lender
  • Seek ways to increase your income


Consumer loans are live savers, especially when you want to fund a huge project and your savings can’t foot the bill. They are also structured in terms of payment and loan terms. Despite the flexibility they offer, they may affect your finances if you do not use the funds wisely.