Monday, 18 November, 2019

Misconceptions about loans


Continuing the recent writing about loans, I now want to clear up some of the misconceptions about foreign currency loans.

“When I took out the loan, I only had 40,000 monthly repayments, and now it’s 138,000 forints.”

This is one of the most commonly heard complaints from foreign currency creditors, but it just has a huge slip.

Unfortunately, the rise in the Swiss franc has made the monthly installment more expensive, as has the rate hike introduced by the banks.

However, far from that extent

The average borrower borrowed at the exchange rate of 155 forints, which was 142 forints at the worst point in July 2008. The current price of the Swiss franc is 237 forints, an average increase of 53%.

Banks’ interest rate hike of about 2% also pushed their monthly paycheck to around 16.7%.

However, multiplied by these two values, the initial 40 thousand forints would still be only $ 71,451.

So what is the $ 138,000?

The solution is simple

bank

A change due to a complete lack of understanding of credit terms.

Before and during the crisis, I was dealing with home loans. At that time, he wanted to take out a happy-an-unhappy loan, even those who had no means to do so.

These people were looking for the lowest monthly repayment. So they went to banks where the initial (!!!!) installment was astonishingly low. They did not understand and did not care how it was possible to have the same loan in one bank at 40 thousand a month and in another at 82 thousand a month. They simply asked for the lowest starting point.

But the explanation is simple. Many banks offered very discounted rates during the first half of the year, and could even neglect to pay back capital. In addition, the loan was combined with a home savings, where you did not even have to pay off the outstanding debt, so that for four years the debt was not reduced, but increased year by year.

During the promotional period of the first half of the year

bank

40,000 monthly installments became due to the deferred interest and deferred capital repayments. Then the real interest came in, so the monthly repayment was 70,000, after six months, the apartment savings ended, and due to the outstanding capital debt the monthly liability jumped again.

It had nothing to do with the exchange rate of the Swiss franc, which only exacerbated this process.

Even so, the change is profound, which has affected people due to the exchange rate of the Swiss franc and the rise in interest rates, but the wrong choice of products or lack of understanding of the promotional interest no longer has to be dealt with in the exchange rate. Before the loan contract was signed, the notaries read the contract point by point, so everyone had to know what they were signing. Another issue is that not everyone is interested.

“The whole foreign currency loan is a scam, the banks did not buy any foreign currency. I got forints and I pay what I have to do with the Swiss franc. ”

I have the bad news: Personal Payday loans are Personal Payday. When the Swiss franc fever raged, the forint base rate was around 8% on average. If the bank added its own margin of 3% (profit), then the interest rate on the loan was well above 10%, which no one wanted to pay.