We keep saying how important it is to a loan to properly handle a loan. Fortunately, many people take our advice and do so. However, we want everyone to do so. Therefore, we are now talking to the skeptics: Attention: This is a lot of money, read on!
Why do I need a loan?
Ever since the world has been around the world, banks have been created to put money in the population for which they receive interest. Just storing money on your own is not such a big deal. But then why does the population need it? The answer is simple because they are worth the business too.
Just think of how many there are, say in Hungary, who bought the real estate for cash where they live. Or, with the current rentals and housing prices, how many years would I need to raise money to buy a property in one go? Usually very much.
So the great advantage of the loan is that the people do not have to pay HUF 15-20 million at one time, but they can repay this amount on a monthly basis, together with interest. In other words, this is a win-win situation. But how is this world constructed in the language of numbers?
This is what interest rates should know
Interest is the charge that a bank makes to us for a high sum, which, in simplified terms, is his profit from the business. In Hungary, the Good Finance supervises the compliance of loans with the rules and the credit market itself (as with all competitive markets). To fully understand this sentence, let’s go down to the basics of loans.
Bank interest rates consist of two parts. From the so-called base rate and the interest premium. It follows that a loan is cheap if both the base rate and the interest premium are low. In Hungary, the base rate is the central bank base rate, which is still at a record low of 0.9%. So that is also the reason why credit rates are so low now.
The spread is, in truth, determined by the market. Just think a little bit. If we can choose a loan at a 3% interest rate, why choose the same 5%. Simply put, if you only need to transfer $ 1 million to the bank, why choose $ 1.7 million?
Just to be less clear, there is only one answer to this, for safety’s sake. This is where the interest period comes into play.
The interest period
What we are willing to pay more for is security. Just think about paying life insurance as a responsible parent. Of course, no one wants his earthly career to end early, and everyone wants his money paid out to be almost thrown out the window. But if something catastrophic happens, at least materially, don’t follow it. So we pay for security.
We can also buy some kind of security with loans. In this situation, you have to imagine this by fixing the long-term interest rates on your loan. There is a possibility even for the full duration. You need to think a little bit. We take out a loan with an interest period of 3 months and pay off HUF 50,000 a month, but if interest rates rise in the market, our repayment will also increase. Or take a loan with a 10-year interest rate and pay $ 60,000 a month, but whatever happens for 10 years will not change.
There is no right or wrong choice, only what is more important to us. Therefore, contact us! We will help you to choose the solution that suits you best.