It is always better and cheaper to save first and only then spend money. Unfortunately, that does not always work that way in practice.
So you borrow money if you do not have the money yet but want to purchase something. In exchange, lenders will of course ask for certainty in the form of a fixed income or collateral and an interest payment.
Interest rates can vary considerably from one provider to another. This usually applies: the greater the risk that the lender runs that the loan is not repaid, the more expensive the loan, so the higher the interest rate.
Where do you borrow?
Most loans are provided by banks and credit institutions. They must have permits for this and are supervised by the Credit Supervision Act.
Different types of loans
The type of loan you take out depends on the purpose for which the money will be used. For a house that is, of course, a mortgage. For a renovation this could be a second mortgage or a revolving credit, for example. But also a credit card with a credit option or buying on account at a shipping house are forms of borrowing.
Can you repay the loan without difficulty?
Sooner or later you have to start paying back the loan. A loan must be well attuned to your financial situation so that repaying it is not a disproportionately heavy burden on your total spending. A financial adviser, bank or lender has a duty of care and must check whether the loan is not too heavy for the income you have.
Shop for the cheapest loan
There is a lot of difference in interest. Not only for the different forms of borrowing, also between similar products. It is therefore worthwhile to search for the cheapest rate.
What is wrong with borrowing ?
There is basically nothing wrong with borrowing as long as you realize that borrowing costs money and keeps the above points in mind.