The subordinated loan in the spotlight

We are all familiar with the classic forms of loans that you and I as private individuals have certainly used before. In addition to the classic forms, however, there are also loans that specifically focus on the business world. One of the best-known loan forms within this category of loans is the subordinated loan. In short, a subordinated loan is a loan that is provided to companies and in most cases also by companies. In most cases, the borrower of the amount is no longer able to take out a normal loan.

A subordinated loan can offer the ideal solution in this case. An interesting solution of which we would like to explain the how, what and why. In this way you will immediately be able to form an idea of ​​what a subordinated loan is and whether it can also be considered in your unique situation.

To make the concept of subordinated loan even clearer, it is interesting to first place the loan itself in the spotlight. As already indicated, the subordinated loan is provided by a company such as a bank or an investment company to another company. The term 'subordinated' is particularly important here.

This is because it concerns a loan where the lender comes at the back of the queue in the event of a bankruptcy of the company to which the credit was provided. In practical terms, this means that if there are several creditors, the creditor who provided the subordinated loan will be the last or one of the latter to be able to recover its amount.

Despite this negative aspect of this type of credit, there are of course also advantages to this loan. Let's take a quick look at these pros and cons of the subordinated loan, as well as the specific order used in claiming debt, which is critical when making a subordinated loan.

The order of repayment in the event of bankruptcy of a company is something that is regulated by law and that is particularly disadvantageous for the subordinated loan. When repaying debts, it is the case that first of all the preferential debts will have to be repaid.

Once this has happened, it is the turn of the credit companies that have provided the company with traditional loans. If these have also been repaid, then any subordinated loans will be discussed. Despite their position, this form of credit still takes precedence over any shareholders or bondholders of the company.

Providing a subordinated loan has both its advantages and disadvantages. The great advantage for the company, bank or investor that provides the credit is that a high interest rate is required on this form of borrowing. With each repayment, the lender therefore receives a considerable sum extra.

This sum must therefore cover the great risk associated with this form of borrowing. Give a little, take a little. In addition, there is the interesting aspect that no tax has to be paid on the interest on the amounts received. You will know by now what the disadvantage is of the subordinated loan.

After all, as an investment company or lender you are placed at the back of the list of creditors. That is the great risk you take when providing a subordinated account and that is what it is all about in the end.

In addition to the lender, a company, investor or bank, there is of course also the company that takes out the subordinated loan. For this company too, there are undeniable advantages and disadvantages associated with this form of loan.

Companies usually rely on this form of borrowing because they can no longer obtain a regular loan for certain reasons. This is also the most important benefit for the borrower.

In this case, we should consider, for example, companies that are facing financial problems, or companies that have already taken out several traditional loans with a bank. It is also important that the subordinated loan can sometimes be regarded as equity. Still a financially interesting advantage for the company in question. The disadvantage is that, due to the high risk that the lender runs, a high interest rate is charged.

This high interest rate, in combination with the monthly repayment that has to be paid, can cause financial problems for a company that was already in lesser papers. A lot of advantages and disadvantages, therefore, for both the lender and the person taking out the loan. A lot of advantages and disadvantages that should also be weighed thoroughly. If you want to know more about the subordinated loan, you can also find information about this on Wikipedia .

No loan for defaulters.

An acquaintance had found a beautiful house, but he could not buy it. He was listed with the Credit Registration Office (BKR) as a defaulter and did not receive a mortgage. It later turned out that he was confused with someone else who had failed to pay off a credit four years ago.

The Credit Registration Office registers many credits, such as credits, credit cards, mortgages and subscription details of some mobile phone providers. It was recently announced that there will be a national debt register, probably this year. There, rent, energy and possibly study debts are registered. The BKR may also manage this register.

Good information is also important. Anyone who pays too late now is sometimes told that further delay can lead to BKR coding. It is good to explain what the consequences could be.

Such a debt register can have major consequences: for example, if you pay your rent too late, you will then be unable to find another rental property for years to come. It is also possible that you do not want to pay your rent because you do not agree with the rent increase. Payment arrears is different from credit debt.

It is good that care is taken to ensure that people do not have too much debt. Nevertheless, according to the Consumers' Association, a debt registration system should primarily have a signal function and should not only be used to reject people who are considered unreliable by commercial companies.

If debts have been paid off or arrears have been made up, you as a consumer should not be chased for five years as is the case with the BKR now. Two years would be better.

To avoid errors, people must be able to easily access their data in the BKR register. This applies not only to the new debt register, but also to the BKR. 600,000 people currently have a (negative) BKR code.

Borrow money for a party

Whether it's for the holidays, a birthday, a wedding or just for a beautiful day, money matters. At you can find all the information you need to take out the right loan.

Borrow money for your wedding.

What does your dream day look like? Are you arriving in a barrel, eating a cake made of cheap chocolate, and hiring an officer in a hurry? Or do you want to make the day the best of your life? In this case, some extra financing in the form of a loan won't hurt! In this article, we look at the options for borrowing money for the wedding so that you can have the best day of your life.

Loan for gifts.

Gifts are beautiful, and it is not pleasant to arrive at a birthday or wedding without a present. If you temporarily do not have enough money to give the gift you want to purchase, it can be useful to take out a loan. Here we take a look at how to borrow money to buy a gift.

The most suitable form of credit.

The personal loan is best suited for the wedding, as the purpose of this loan is to purchase a particular object or to accomplish a particular goal. In this case, the objective is very clear: to seal the love towards the bride or groom. And such a day should be remembered with a big party accompanied by the most beautiful music produced by nice bands. But how can you arrange the financing of your party by means of a personal loan?

Personal loan.

This is quite simple: a personal loan is easy to take out. Look for a suitable financial firm or bank with favorable terms and conditions and visit us for a no-obligation consultation. That way, you can make your terms clear and bring out the details plus the purpose of the loan. A big advantage of the personal loan is that the conditions can be completely adapted to your goal, the wedding. Variables such as the interest, term and repayments are determined entirely in consultation, making this the best business method to finance your wedding.

Loan from friends.

It is of course also possible to borrow money for your wedding from acquaintances or friends. However, I personally advise against this, since the risk of imbalances is lurking. Once you accept money from someone you care about, keeping this business connection becomes difficult. When problems subsequently arise with the repayment, it can become too personal with all its consequences. It is therefore a lot more sensible to keep it on a business loan.

Wedding: Have the best day!

Thanks to the personal loan , it is certainly possible to take out suitable credit for your wedding at your bank, for example. That way, you will marry the way you envision, but remember that the debt will haunt you until it is paid. In short: do not forget that you will only be married without worries once the loan has been fully repaid.

Consumers know little about borrowing extra money

Research by the Across Lender shows that about half of the 5000 respondents had no basic knowledge about borrowing extra money. This group was able to name a few options for borrowing extra money, but often did not know the basic knowledge for budgeting. Other different studies have shown that many consumers do not know very well which loan forms there are, what the consequences are of borrowing money and how you can budget.

For example, many consumers do not know that they can borrow extra money with a mini loan. Being in the red is a bit more known among consumers, but many do not see red as a form of loan. This further emphasizes that they do not know all the consequences of all loan forms, because being in the red is indeed a loan and also costs money.

Where can you and I actually borrow money easily? Borrowing from friends and family is common. It is often easy to borrow extra money from them. Borrowing money directly from employers is sometimes also an option. Employers sometimes offer loans, for example in the context of a private PC project. The employer then finances, for example, the pc for and withholds the repayment and interest from the wages. Other variants are also possible. For example, some employers do not make loans for a PC, but for a bicycle. Borrowing extra money from an employer is a form of borrowing money privately.

In addition to borrowing money privately, there are also the professional lenders:

  • Finance company;
  • Bank;
  • Card issuer;
  • Mail order company;
  • Municipal Credit Bank.

Finance companies are one of the main providers of consumer credit. They provide approximately 40 percent of all loans to private individuals in the Netherlands. The finance companies originated in the United States around 1850. It originated from a Singer company. They sold sewing machines, but they were too expensive for consumers. They came up with the idea of ​​paying off. Nowadays it is possible to purchase a product on installment at many companies. Subsequently, the customer cards were also developed.

Banks are also one of the main providers of consumer credit. Together, the banks make up approximately 45% of the loans issued. Unlike finance companies, the banks entered the market late. Banks were only really available to private individuals around 1950. This was also in connection with the growing prosperity. Wages were increasingly transferred digitally. Today, the banks are indispensable in our society. Banks are now not only a convenient place for salaries, but banks are also ideal for savings, investments and mortgages. And of course let's not forget about providing loans.

The credit card companies are also part of the credit providers. A credit card company guarantees a consumer's payment obligation for, for example, payments at a hotel. The consumer can then later repay to the credit card company. Of course this is accompanied by interest.

Then we also have the mail order companies . A well-known mail order company is Wehkamp. A mail order company brings its products to the attention of consumers by means of a catalog (can be sent by post or digitally with a website, for example). Consumers can then decide whether they want to pay for the products in one go or whether they prefer distributed payments. Ordering from mail order companies is often tempting. Many consumers have therefore received a BKR registration from a mail order company by making ill-considered purchases.

Finally, there are the Municipal Credit Banks (GKB) . The GKB do represent only 3 percent of all loans issued. As the name suggests, the GKB is an organization from the municipality and mainly provides social loans.

Borrowing extra money is therefore possible from friends and family, but also from financing companies, banks, credit card companies, mail order companies and the GKB.

The government is aware that it must educate its citizens about borrowing money in order to avoid debt. Borrowing extra money is always possible, but borrow responsibly. Know which loan types there are and research by requesting quotes which loan is best for you at what interest rates and conditions. More and more consumers are also receiving budgeting tips and the government is also working on stricter rules regarding borrowing extra money with a mini loan .

Installment purchase

If you have already bought something on installment , you are certainly not alone. This form of credit has been around for years and is more popular than ever at the moment. The reason is obvious, buying on installment is a way to get what you want without being endlessly bent for it.

Critics will note that you are indeed bent over it, but only after you have bought. Because whatever the retailer says, buying on installment is not cheap. It would not make sense for installment buying to be cheap, because of course it costs the retailer money. He has to wait for his money, but you already have the stuff. So there is always a price.

In the case of installment purchases , that price may consist of a high interest rate or a hefty fine if you pay late. Always make sure to read the fine print before signing for something. I know it's a pain to sift through all that, but it'll make you money later. Or at least it will save you misery.

Another tip is to make quick repayments. If you still have outstanding amounts, make sure you transfer money as soon as possible so that you get rid of your debts quickly. Then you do not always have to think about outstanding amounts.