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Recommendations to borrowers

Think twice, borrow once

  1. Your repayments should never be more than 30-50% of your monthly income.
  2. Test any ideas about taking out a loan on the ‘want vs. need’ scale. If you only want something, don’t take out the loan. If you truly need it, a loan might be a good idea.
  3. If your application is turned down, ask why and take any recommendations on board for the future.
  4. When applying for a loan, trust the consultant – and your instincts.
  5. Borrow only as much as you need and not a cent more.
  6. Only when you’re truly prepared to go without 40% of your monthly income are you ready to take out a loan.
  7. Gifts should come from the heart – not from borrowed funds.
  8. Loans taken out in haste are often the heaviest burden.

A loan can help you realise some big plans you have, improve your standard of living or make a necessary purchase you've wanted to. Taking out a loan is a serious decision. Every loan has to be paid back, in full, plus interest, and in order to do so it's more than likely that you'll have to review your everyday spending.

In this page you’ll find ours and the Consumer Protection Boards recommendations that will help you make the right decision about whether and how much to borrow. All of the consumer credit services offered by the bank are covered by the term 'loan' herein: home loans, home equity loans, personal loans, credit line, hire purchase, student loans, car, motorcycle and small craft leasing and credit cards.

HIs borrowing really justified or are you just taking out the loan on a whim?

Before borrowing anything, you should seriously consider whether you need to. Weigh up the alternatives. Think about whether you could dip into your savings instead, or whether whatever it is you're planning to do with the money is something you need right now: could it wait until you've saved a bit more?

If it can wait, you're better off putting some money aside first. Loans always come with added costs, and if you can afford to make the repayments, you can clearly afford to save a bit more money. Of course, it all depends on the amount you're looking to borrow and the timing of your plans.

Are you convinced that the loan you're intending to take out is the most suitable option for you and that it takes your lifestyle, income, consumer habits and other factors into account?

Loans are issued for different purposes and with different terms and conditions. Every client should be able to find a suitable and affordable loan if they talk to a good consultant and are honest with themselves. So if there's anything you're not sure about, or you just want a clearer picture of what your options are, come in and talk to us.

You can 'speak' to our online consultant in order to determine your options, or for more specific recommendations talk to one of our specialists by calling Customer Support on +372 6 310 310, e-mailing or popping in to any branch.

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Have you realistically assessed your financial position? Will you be able to continue repaying your loan if your income decreases or your costs increase? Have you calculated how much you will have to spend on food, clothes and other things each month on top of your loan? Will you be left with enough money after making your repayments?

If you're intending to take out a loan, think carefully about how much you need and what you need it for. If you borrow less than you actually need, you may soon find yourself needing to apply for a new loan. The problem then of course is that you'll have to pay more fees. On the other hand, if you borrow more than you need you may find that it's gone before you know it. Always bear in mind that whatever you borrow has to be paid back, in full, including interest.

Before borrowing, put yourself in the bank's shoes for a moment and consider how creditworthy you are; think about the kinds of costs you have to meet each month, and draw up a proper budget. Your income may well increase down the line, but you should only ever consider your existing options when making your decision. If you want to be a happy borrower, you'll need to make sure that the loan doesn't start causing you problems in or affect the quality of your everyday life.

You also need to take into account that you should still be able to save for your retirement and investments while you're repaying your loan.

Have you studied all of the terms and conditions of your loan to the point that it's entirely clear to you and you understand every point?

Reading through the fine print of a contract might not be anyone's idea of a great time, but every minute you spend doing so now will repay you in spades later on. Always study the terms and conditions of any loan you're planning on taking out - and ask for clarification if there's anything you don’t fully understand. With personal loans, the key terms and conditions are listed in pamphlets you can pick up from any branch. If you're interested in a home loan or car leasing, we send you this information once you've submitted your application and it's been approved.

Get it clear in your head as to how much interest you'll be paying, how long the repayment period is and what the other conditions of your loan are. Your repayment period should be as short as is feasible, but as long as is necessary.

Before entering into any agreement, it's worth investigating the conditions on which you can repay your loan ahead of time should you wish to, since this is often subject to a fee. Check this before you sign on the dotted line.

document Pre-contractual information for credit card, personal loan, overdraft and leasing clients

document Pre-contractual information for home loan and home equity loan clients

Have you thought carefully about the most appropriate repayment schedule (interest payments from the balance of your loan or from the amount of the loan, repayment period et al.) for your income?

When you take out a loan it's important to know how the bank will calculate interest on it. This not only determines what your monthly repayments will be, but also how much the loan will end up costing you in the long run.

If you take out a loan using property as collateral, it's always a good idea to calculate how much interest you'll end up paying. For example, if your borrow €63,000 for 30 years, your monthly repayment will be just over €260, but you'll end up paying more than €32,000 in interest. Alternatively, if you reduce the repayment period to 20 years, your monthly repayments may be €85 higher, but your total interest is slashed to €20,400.

You can make your repayments using one of two schedules. Repayment on the basis of a fixed principal schedule means that your monthly payments are larger at first due to higher interest payments. These gradually decrease towards the end of the period of your loan, meaning lower monthly payments. Repayment on the basis of an annuity schedule means that your monthly payments are the same throughout the period of your loan, depending solely on changes in the interest rate. The term of a loan with an annuity schedule with fixed monthly payments becomes longer or shorter depending on changes in Euribor.

Interest payments on personal loans with no collateral

Example: loan of €1300, repayment period of 4 years, interest rate of 18%

Interest payments on balance of loan
Repayment period 48 months Basic amount Interest Total
  1300 EUR 533 EUR 1833 EUR

In the case of loans with property as collateral, the interest rate will be agreed with you when you enter into your agreement. It will comprise the base rate and your margin, which is calculated separately for every client. The interest rate on your loan will change over time as the base rate changes.

There are three options to choose from with the base rate

Are you fully aware of how much the loan will cost you in the long run, and is that amount a reasonable one?

Almost all loans come with costs other than just interest, and they differ from one loan to the next. The most one-off additional costs you'll normally have to pay are if you take out a loan with property as collateral.

  • Contract fees

    Entering into a loan agreement is subject to a fixed fee, which you either pay when you sign your contract or when the loan is transferred to your account or you first access it. This depends on both the amount and type of your loan. Check these details with the bank before you enter into your agreement.

  • Costs and notary fees involved in valuing and pledging assets

    If you take out your loan using property as collateral, the bank will ask you for a valuation of whatever it is you're planning on buying. You can arrange for one to be carried out by the bank or by a real estate agency approved by the bank.

    Once you've signed your agreement, a contract for the sale and purchase of the property is entered into before a notary, with the property generally being pledged as the collateral on the loan. Notary transactions are subject to fees and, depending on the transaction, state fees may also apply. The amount of these fees depends on the type and value of the transaction. Ask your consultant about the approximate cost for your loan.

  • Insurance costs

    Whatever you use as collateral on your loan, you should insureit. This might mean extra monthly payments, but it's better to pay a little each month than a huge amount later on if something happens to your property. We also recommend that you insure your contents.

  • Total cost of your loan

    Before you enter into your agreement, the bank should issue you with comprehensive details of the final amount of your credit, which is to say the total cost of your loan. This will summarise all of the costs connected to your loan that you'll have to cover, including interest, contract fees, taxes and other charges. It won't include notary fees or the costs of mandatory annexes to your agreement, since the bank can't say at the outset what these will be.

  • Annual percentage rate

    The annual percentage rate indicates the annual burden on a client arising from costs associated with the use of credit (such as interest and contract fees) expressed as a percentage of the amount of credit used, on the assumption that the contract remains valid for the agreed period.

    This rate changes if the term of the agreement is shortened or extended.


    If a client takes out a personal loan of €1500 for one year with an interest rate of 17.5% per annum and a contract fee of €35 and repays the loan on the basis of a monthly annuity schedule, their annual percentage rate is 20.54%.

    Repaying a loan according to an annuity schedule means that the monthly payments are the same for the duration of the loan, dependent only on changes in the interest rate.

    The annual percentage rate takes into account how much the borrower has to pay the bank in addition to the basic amount of the loan as well as the fact that the value of money changes over time (usually decreasing). For example, a year after a loan has been issued, the amount that's been repaid may be worth less at the time it's repaid than it was when the loan was granted. That's why the annual percentage rate is normally higher than the annual interest rate.

For an overview of the annual percentage rates for different agreements, click HERE.

Are you prepared for the fact that your lifestyle may change significantly due to the loan? Do you have a back-up plan should you or another member of your family lose your job or no longer be able to work?

To be sure you make your repayments on time, all you have to do is guarantee there's enough money in your account on the repayment day. That way you'll never miss a repayment. If you're late, the bank will impose a penalty.

If it becomes obvious that you'll have ongoing difficulties making your repayments, tell us straight away. Your loan consultant will be able to help you find the best way around the situation. Usually you'll be offered a break from payments or the period of your loan will be extended so that your monthly payments are smaller.

While you're taking a break from payments you only pay interest, and don't have to make your basic payments. This means that the balance of your loan decreases more slowly and that you'll end up paying more interest overall, but it still makes sense to take a break if, for example, you have a baby and your parental benefits are stopped or if you change jobs.

You can repay your loan ahead of time

If you're able to and want to repay your loan, whether partly or in full, ahead of the deadline set out in your agreement, you should let the bank know in advance, based on the terms and conditions of your contract, and bear in mind that you may have to pay a fee for doing so. (If you do, the amount you have to pay and the advance notice you have to give will be indicated in your contract.)

Are you sure you've made the right decision about your loan? Have you asked your lender what happens if you run into problems making your repayments?

You should always talk to experts before making important decisions. If the loan you're interested in taking out isn't too complex, you should get the answers you need from one of our tellers or a specialist from our call centre, but if it's more involved you should have one of our consultants draw up a contract for you and then go through the terms and conditions one step at a time. If there's anything you're not sure about, they'll be able to give your more detailed explanations.

Your consultant is there to help and advise you on everything to do with taking out a loan, and after you do they remain your contact person, who you can talk to at any time if you have questions related to your loan.

If you're planning on borrowing with property as collateral, call Customer Support on +372 6 310 310, e-mail or come in and talk to us at any of our branches.

Are you sure that providing collateral/surety is a right decision? Will you be able to meet the obligations that you are about to assume?

Many of us have had experience providing real estate collateral to secure our own or someone else’s loan. This means that if the loan is not repaid, the bank has the right to claim the sale of certain real estate (e.g. an apartment or house together with its land) belonging to the collateral provider. In order to meet the obligations for which you have pledged collateral and to avoid the forced sale of your property, we recommend that you follow some simple advice.

By signing a contract of suretyship you promise to fulfil the financial obligations of another person or company if they themselves fail to meet them. You will be fully responsible for all payment obligations arising from a loan or leasing contract (or another credit contract) but only up to the extent of the maximum amount agreed in the suretyship contract. Provide surety only for the obligations of a person you know well and can trust.

document Useful tips for real estate collateral provider

document Useful tips for surety provider

If you’ve answered all of these questions honestly and some of the answers are still "no", you should rethink your decision - taking out the loan could leave you worse off in the end financially rather than the other way round.

In order to be able to make informed decisions, you need background information. A lot of financial services are interconnected, and if you want to understand them you need to know how these connections work. To this end, the Financial Supervision Authority has launched the website

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