In most cities all over the world, you need to deposit a certain amount of money when renting an apartment. It is known as caution deposit/fee in some regions in the US but commonly known as plain deposit in Norway. This amount of money is usually a lump sum and can be out of reach for a good number of people.
Just as in every situation where people need lump sums, you can always take out a loan for this purpose. Although you can use a consumer loan to sort your housing deposit, there is a specific loan for deposits in Norway. You can visit this site: forbrukslån.no/lån-til-depositum/ for more information.
In this article, we will explore the basics of loans for deposit, the requirements for qualification and factors to consider before taking out the loan.
Basics of Loans for Deposit
Before you go ahead to borrow money for deposit, you need to know the basics and what a deposit on an apartment entails. There are 3 major things to know and they are as follows:-
- The deposit is the meant for taking care of any significant damage that a tenant may cause to an apartment.
- The amount of money to be put down as a deposit must not be more than an equivalent of 6 months’ rent. The most common sum requested is usually about 3 months’ rent.
- The money must be paid into a joint deposit account and the landlord and tenant must have access to the account.
What is Significant Damage
You know that if you want to rent an apartment, you have to put down a deposit, and that the money is meant for significant damage to the apartment by the tenant. Now you need to understand what significant damage to the apartment entails.
One cannot live in an apartment without expecting some wear and tear. Wear and tear consists of minor damages such as cracks in the plaster, chipped paint, worn carpets and scuffed floors. These are things that happen over the cause of daily living in an apartment and are often unavoidable.
Significant damage on the other hand includes changes that occur due to negligence or outright action of the tenant. This include broken windows, holes in the wall, breaking down the door because you lost your key and other things as will be listed in your tenancy agreement.
If any of the things listed as significant damage in your tenancy agreement doesn’t happen throughout your stay in the apartment, then your deposit will be refunded when you want to move out of the apartment. Therefore, you need to read the fine prints carefully to be sure you agree with the terms and conditions of refund of your deposit before signing the agreement.
Acceptable Amount to be Paid as Deposit
Another important factor to know is how much is acceptable to be paid as deposit. The standard is 3 months’ rent but in some cases some landlords ask for more. Bear in mind however that it is not permitted by law for any landlord to ask for more than an equivalent of 6 month’s rent for deposit.
Account to be used for the Deposit
The account into which the money is to be paid should be one that both the landlord and the tenant will have access to. This is because most times, disputes arise when the tenant wants to move out and some landlords will try everything possible not to refund the full amount paid as deposit. When this happens, the money should be in an account that neither of the party involved in the dispute can access until the dispute is settled.
Requirements for Qualification for Loan for Deposit
There are a number of banks in Norway that give specific credit facility for renters seeking to put down deposits for their apartments. These banks all have requirements that may differ slightly but there are basics across board and they include the following:-
- Age Limit – The borrower must be more than 18 years old; some banks even set their limit at 20 years.
- Income – The borrower must have a verifiable fixed income.
- Credit Score – The borrower must have a good credit score that can get them approved in a credit check. Click here for specific tips on how to build and maintain a good credit score in Norway.
Factors to Consider before Taking out a Loan to pay your Deposit
While there is credit facilities that are tailored to helping tenants put down the caution fee required when renting an apartment, you should proceed with caution. It would do you more harm than good to just go ahead and take out this credit without due diligence. In this last segment, we will share some factors you should consider before taking out a loan for this caution fee and some tips to help you make the best of it.
Rental Price
The amount you would need to take out to put down the deposit depends solely on the rental price. The average rental cost in Norway is NOK15, 000; this therefore means you are looking at a minimum of NOK 45,000 as caution fee. If unfortunately, your landlord demands an equivalent of 6 months then you will be looking at the sum of NOK90, 000.
From the above, it goes without saying that you should consider how much you can comfortably repay if you take out a credit facility to pay your deposit. That should form one of the basis on which you will choose an apartment. Find out how much apartments cost in different places and what percentage of deposit they require before proceeding to rent an apartment.
Your Savings Account
Look at the amount you have in your savings account and consider whether it can cover the caution deposit. If it can, consider whether you are willing to have that amount tied up until whenever you are ready to move out of the apartment. Additionally, you need to consider whether that money is needed for a more pressing or important project or is just lying fallow.
Furthermore, bear in mind that the refund of this money is not automatic. The landlord will inspect his property to determine that there is no serious damage before agreeing to a refund. So consider the possibility that the money may not be refunded in full or even at all.
When you have weighed all the above, you can then decide whether it is worth your while to take out a loan or use your savings. If you take out a loan and get a refund of the caution fee at the end of your tenancy, all you would have paid on the loan will be the interest. The principal can be considered savings. If on the other hand you use your savings, you would not have to pay any interest.
The Interest Rate
This is very important as it will determine whether you should take out the loan or use your savings. However, in the event that you do not have sufficient funds in your savings account to offset this ill, you have no choice than to engage a credit facility. If it so happens that you have to take out a loan, ensure that you search for one with the lowest interest rate possible.
Conclusion
Just as with taking out a consumer loan or any other type of loan, you need to exercise caution and do your due diligence before taking out a loan to cover your rental caution fee. Do not be in a hurry to sign any rental or loan agreement. Take your time to read the fine prints of both your rental agreement and loan agreement.
You need to carefully consider the best way to go about raising money for this expense. We have shared some valuable information in this article and we believe that it will help you make an informed decision. So bear them in mind as you proceed in both your house hunt and search for the best loan option.
