Credit: When More Less

There is a marketing term, “poster price”. Say, in bold letters, that the XY car is only $ 3,999,000. It turns out in the salon only that there is such a car for this, but no air conditioning, no parking radar, no tilt rear seat, so no one buys it poster car. The real price of a car is five million forints and above, the poster price is only to entice customers to the salon.

If you think the poster price is only used on cars then you are wrong. As it turned out, the very attractive interest rate is only available for loans over HUF 3 million, and the interest rate is significantly higher. But so much so that it specifically has more than double the interest on two million than three million.

The 6.9% low-cost loan is being advertised everywhere on billboards. The figures on the website are slightly different, that is, at 3 million forints and above the low APR, and in other cases they change in a band. Here are some pictures, which show, for example, that 2.9 million monthly installments are more than 3 million since the APR is higher.

 

Obviously the pricing of the most used loans is different

Obviously the pricing of the most used loans is different

There’s no problem with that, you need some kind of customer lure, but obviously the pricing of the most used loans is different.

I was wondering how much a drop of attention could be saved, so if I take out a discounted $ 3 million loan and immediately transfer back $ 1 million as a prepayment (because, say, I only need $ 2 million with a APR of 14.9% !!!), then that is what it entails.

So what’s written on it? For 5,000 forints (that’s 0.5% of the 1 million) I’ve already solved to have 6.9% APR on the 2 million credit line.

And what else can we find below? If I pay back the $ 1 million in two installments ($ 200,000 on the day of the borrowing, $ 800,000 the next day) and I fill out two prepayment forms, I don’t have to pay the $ 200,000 prepayment fee, only $ 800,000, low THM.

 

I tried to check back to see if I had a good idea of ​​the process

credit

But not the sharpest knife from the kitchen behind the “Credit Expert” chat on the site. We get stuck. Unfortunately, at the beginning. On the other hand, it is positive that in two simple steps the percentage calculation has been successfully passed.

So if you are serious about borrowing, let’s run a round at the bank and try not to chat.

So that’s it. If you need a personal loan for some reason, take more and pay it back the next day.

 

When is a Personal Loan a Good Idea?

When is a Personal Loan a Good Idea?

For example, buying a home or renovating it requires a couple of million forints, but only for a few months to a year. Let’s say you can repay a few hundred thousand a month, or expect a larger amount in a few months.

You could take out a home loan or a free use loan, but it would cost a lot more. Valuation, disbursement fee, land registry costs, etc. Prepayments can also be much more expensive, 1-1.5% compared to 0.5-1% in the example.

 

It is better to take a personal loan with a 7% interest rate

It is better to take a personal loan with a 7% interest rate

It’s cheaper, easier and faster. What you should keep in mind is that you need a good salary because they will give you X times your salary and your monthly repayment will have to be within 40-50% of your salary.

Get Rich Quickly With Credit

Exactly a week ago, I dared write bad about Mr Komura, one of the prophets of quick getting rich. According to the Orthodox method, the secret of getting rich is hard work and thrifty life.

 

Applying for a loan and investing it in money-generating investments

Applying for a loan and investing it in money-generating investments

The unorthodox method is to get rich by applying for a loan and investing it in money-generating investments that make more than the cost of the loan. The best known way to do this is to buy a home from a loan, then sublease it and repay the loan from the rent.

There is a whole library of literature on this technique, many of which are also available in Hungarian.

As a rule, these clever tips ignore one thing: risk.

Because if you are in debt, in order to buy something that makes money, you take a lot of risks that these people do not understand.

The prime example of financial nonsense, which has been high fashion in Hungary for a few years now, is thanks to a well-trained company agent. They persuaded people to buy Japanese yen-based loans for their house at 5% interest rate, investing in Chinese equities through unit-linked insurance, which yields 40-50% a year and simply pockets the profits.

Thousands, if not tens of thousands, jumped into this suicide stunt.

They forgot the risk of fluctuations in the Japanese yen-forint, changes in the interest rate on the Japanese yen, the collapse of the Chinese stock market, and even the cross-exchange of the Japanese yen, as they bought yuan-based shares.

The only picture floated in their eyes: the time has come to make millions out of nowhere with the help of a clever and smart “financial adviser”.

After all, the cost of unit-linked horror is not worth mentioning. (You can read about it here.)

I’ve been saying for a long time that it’s a great luxury not to get the money. The problem is not if you do not know it, but if you ignore it.

But how easy is this suicide stunt advertised by the above prophets? It is a harmless act to take a home and lend it out of credit.

(The so-called asset price bubble occurs when the price of an asset (real estate, stock, whatever) rises faster than the interest rate on the loan, ie it seems worth buying from a loan because it pays more than the cost of the loan. But it’s always a bubble that pops up quickly.)

JP Conters beautifully described in his book how he dealt with these tips (The book’s title is Debt elimination, available from Amazon)

He and his wife were earning double the US average of $ 102,000 a year, but, drunk on the tip, took out two properties on loan to rent. They also borrowed money for their mother’s house, buying two high-yield securities to earn 12% on the 6% interest rate.

 

Everything you need to get rich quick

Everything you need to get rich quick

Then the big real estate balloon burst, as did the stock market. Mom’s investment lost much of its value, house prices began to plummet and tenants disappeared.

They were there with three mortgages on their necks, without enough income.

First they had to pay all their salaries, then the children’s life insurance, and then when the burglars took the copper pipes from one of the houses, they suddenly had to make thousands of dollars to replace the stolen pipes so that the property could be rented out again. As a result, credit cards were drained.

As usual, the burglars came back and took all the pipes again.

 

They tried to sell the houses because they could no longer afford it

They tried to sell the houses because they could no longer afford it

Their lives were completely upset, they lost their creditworthiness, they saved their kids’ savings, then they could forget about their retirement, they were overwhelmed with credit card debt, and even their mom’s credit cards were discharged. The real estate could eventually be sold with a huge failure, and they also had to file for bankruptcy. That was the price of their greed and financial stupidity. By the end of their lives, they would have been able to live abundantly on twice their average salary.

If you are interested in how they finally got out of it, read their book. What I want to talk about right now is that there is no sure-fire tip for getting rich.

If you seem to be working or are being claimed by high-end authors, then all you have to do is not understand what is at stake, and the authors have no idea. That’s why I dared to criticize them in my previous post.

 

Learn from their example and forget about these silly tales about getting rich quick

Learn from their example and forget about these silly tales about getting rich quick

The only sure-fire recipe for getting rich is to slowly get rich. If you work hard for success and spend much less than you earn, nothing can stop you from becoming a rich person, even in the short term.

Do you need real financial advice, are you tired of agents? Click the link for more information.

Finance in the Family

 

I’m writing today about a topic that is the source of a lot of problems, and that is finance between relatives and friends.

When someone wants to buy something or is in financial need, the first reaction is to borrow it from their immediate relatives or friends.

Another, perhaps even more serious case, is when a bank borrows a bank, asking for a guarantor, and explicitly expecting us to guarantee our brother or best friend, because that’s all we can really do for him.

Particular mention should also be made of the division of property resulting from divorce.

Let’s take a look at the traps these everyday situations hold.

First of all, I want to disprove a myth: when you give someone a loan, most of the time, it will not be a blessing but a curse .

If your kid comes in, your granddaughter, your sister wants to buy a car but she doesn’t have the money, the worst thing you can do is give her a loan instead of highlighting the fact that she doesn’t have the money to buy her an early car .

If you really want to help him, pay for financial advice to find out that he has to live up to his options and not his desires. If you give it money, you are confirming the huge mistake of being able to achieve anything with real credit without real performance.

 

Money cannot be returned by the borrower

Money cannot be returned by the borrower

Another problem is that very often the money cannot be returned by the borrower and this will poison your relationships forever. Lots of friendships and even kinship are ruined by financial disputes and unpaid loans. My friends and relatives are worth more to me than losing them for fifty to one hundred thousand forints . How are you doing with this?

Think about the situation: you lent a million forints to the car mentioned above. The car is stolen or broken in two months. Or your friend loses his job, not to mention your credit, but he can’t even pay the overhead, let alone his other loans. This unspecified money is guaranteed to ruin your relationship forever.

Therefore, if a relative or friend asks you for a loan, tell him that your friendship is worth much more than ruining a couple of pounds.

If you still want to help, there is a solution: do not lend the requested amount, but a gift. But only if it doesn’t put you in a difficult position. If you find yourself in a difficult situation with a gift of this amount, you are not the right person to help.

If you do lend, always write it down. This is not distrust. Consider the following situation: You lend a well-to-do entrepreneur brother $ 10 million to buy a home, he only needs half a year to sell his other property. Three months later he dies in a car accident and his entire fortune is inherited by his two minor children, and all the money is immediately handed over by the ward. How are you going to get your money back without a contract? Can you prove that the money is not for the kids, but yours? Right?

 

People who get away with paying off their loans

People who get away with paying off their loans

Whether they are home loans or credit card loans, often ask for money. They think it is your duty to help people, but in most cases these loans are already unscathed and you only throw your money into a bottomless pit when you lend to such a person. In this apartment, which the bank is sure to take, it is unnecessary to add another hundred thousand forints just to make the inevitable end two months later. Here too, the real help is when you seek the help of a financial advisor for your friend. If there is a solution, a specialist will help you find it; if not, your money won’t help either.

Also, think about how someone who can’t pay the bank for months will know how to do it, especially if the bank also blocks their payment? Never decide on money when it comes to sentimental feelings.

And if your relationship broke down due to a non-repayable loan, release the debt . You won’t get the money back that way or that, but at least the friendship will.

 

Never give a guarantee!

Never give a guarantee!

Whenever someone wants to take a loan and the bank does not find his income satisfactory for the loan, he asks his borrower for a guarantee. This is when people rush to their friends or relatives to sign the paper.

Have you thought about what you will do when you are guaranteed for someone? There’s a man who wants to buy something he can’t afford. There are two proofs of this: you don’t have the money because you need credit, but you won’t even be able to pay the loan, according to the bank.

Hey, do you want to be financially responsible for such a bad credit? The message to your relative or friend is that you should not buy a flat, a car, whatever, because you can’t afford it and right. He has no money, no income.

Will you know if you are not paying your loan properly? No, the bank won’t notify you. Will you know if you don’t pay the insurance? If the car is stolen or smashed? If you lose your job? No no and no. You will only know when the loan has run out and the bank will foreclose on your payment or enforce your property on the guarantee. Some people find the bank after 10 to 15 years, and you don’t even remember ever signing anything. You haven’t seen that “friend” in the last 8-10 years.

When I was a mortgage administrator, it was common for a borrower to find that he or she was on the active BAR list while never having a loan. It wasn’t, he was just a guarantor of bad credit.

So, tree-to-tree simplicity: Never give a guarantee to anyone , whether your relative or acquaintance asks for it.

 

Divorce: Don’t just divide your wealth.

Divorce: Don

When divorcing, it is important that you arrange all material relationships, not just distributing wealth but also credit. The first sentence of divorced people in trouble is usually this: we agreed to keep the apartment and pay off our loans.

However, you do not pay and you were a debtor when you took out the loan, so the bank will send the bailiff to you, because nowhere is it that you are no longer living together. But a common credit card, a car loaned to a little girlfriend, and everything else is a devastating time bomb that will explode in as little as 20 years. (Remember, a home loan can last up to 30 years.)

Therefore, in the event of a divorce, you should also clarify the common loans so that you do not believe they will pay off. Keep the apartment, but write the credit in your own name. Keep the car, but take the lease and give your credit card. Don’t want a broken material life beside your broken heart.

4 reasons why being a good driver allows you to save

Driving habits in Peru are quite far from ideal. Every day there are many drivers who commit an infraction, produce an accident and make fun of the law as if nothing. That’s why sometimes you ask yourself, will it be worth the effort to follow the rules and drive well when everyone seems to do the opposite?

Driving properly will always bring retributions, especially to your pocket. These are four reasons why making that effort will always be worth it:

You do not risk causing accidents

car loan with money cash

As much as you have vehicle insurance, you will always have to pay the deductible, so driving correctly saves you even that expense because it will not cause accidents.

It does not break any rules: In many districts there are now cameras, so if you think it will go unnoticed, you are wrong. Some fines can be slight, while others, quite expensive. It is definitely better to avoid them. Do not spoil your car: Part of keeping your vehicle in good condition has to do with your driving habits. How it slows, how it accelerates, when it turns on the lights, etc. Being a good driver will help you take care of your car and therefore save on repairs.

Save on your auto insurance

car loan with money cash

You now have the option of recovering a portion of what you paid for your insurance, as long as you have demonstrated correct driving habits. During the entire duration of the policy, you will be monitored to show how you have handled and in the end, you will be returned up to 30% of what you paid.

Do not forget that part of being a good driver is having the right protection, that is, choosing the car insurance that best suits your model. Compare your options, choose and keep your car protected.

 

Credit and savings?

Now that you can get a flat-rate mortgage for up to 10 years at a reasonably high salary at up to 3.02% per annum, or at a lower interest rate for a shorter interest period, the question is often whether you would not be better off pay off the outstanding loan even if you have the required amount or cash to buy the property.

The questioners see what returns can be made on the capital market, or even in a secure premium government bond.

Is it worth the debt even though we already have the loan? Do We Get Something Between Lower Loan Interest and Savings Yield? It is tempting to invest other money for our own benefit at a 3% interest rate.

Before we go into this, let’s do some basic things.

 

The first thing most people don’t expect is the risk.

credit and savings

One of these risks is the risk of changing the interest rate on the loan. If the now 2.5% interest rate element becomes only 4-5% interest rate due to changing circumstances, my stunt can quickly pay off. Just to remind you, in 2012, the average interest rate on home loans was 14%. There is no reason why the average interest rate should not be the same again in 5 years. Not long ago, it happened twice in five years that the base rate of the forint jumped 3 percentage points overnight.

Therefore, such a trick should only start with a fixed rate loan until the end of the term. Banks have been offering fixed-rate loans for 20 years, though its interest rates are far from attractive.

The other thing is that I can’t compare the performance of the American stock exchange over the past three years with the past three years of interest on the loan element.

 

The US and any other stock market can collapse at any time

The US and any other stock market can collapse at any time

The exchange rate reached in 2000 was restored in 2007 by the US stock exchange for a short time, and then, in April 2013, returned to where it started 13 years ago, thanks to the next crisis.

Think about it, if you had invested money on the American stock market with money from a loan for which you have to pay interest. In 13 years, all you would have gained was to get your capital back to zero while paying a lot of interest on your loan each year. You would have lost a lot because of the difference between the interest paid and the dividend you received.

And we haven’t even talked about currency risk. The dollar was above $ 310 in 2000, and by 2008 it had fallen below $ 158. You would have doubled down on a US dollar listed investment.

So it would be a great irresponsibility to buy money from a loan, but to buy an investment fund, no matter how risky.

Therefore, only forint-based, risk-free investment is possible. Currently there are two eligible products: premium and bonus Hungarian government bonds, inflation plus 1.4% and one-year government bond plus 2-3% interest. If the official inflation rate is above 2%, you will gain a little of the difference, and with the 10-year bonus government bond, the one-year government bond yield will be your profit. But it’s also gross, since you also have to pay 15% interest tax if you bought government securities on a non-TBSZ account.

Other costs are the early redemption of government securities (1%), the fee for early repayment of the loan (another 1-1.5%), and the initial cost of the loan.

It can be quickly seen that at 10 million HUF, 1% net interest gain represents a hundred thousand HUF annual gain. (Be careful when calculating that due to the continuous repayment of the loan the amount of the capital decreases, thus the profit difference on the available capital as well.)

 

The formula is further refined by state-supported loan repayments

state-supported loan repayments

On the one hand, in cafeteria, you can apply for tax-free home loan repayments. This saves you tax on other cafeteria items. For example, the tax on cafeteria received by the health fund is 41.3%, and the tax rate on home loan repayment is zero, with a monthly repayment of $ 83,000, the difference is obvious. (Even if the employer determines our cafeteria frame gross so we get more for zero-key cafeteria items.)

In addition, we can withdraw about $ 20,000 per debtor from a self-help fund, in which case our profit is 20% of the amount paid to the fund in the form of a tax credit, minus the cost of the fund. With two debtors and average cashier costs, it is approximately 6,400 HUF / month, or approximately 77,000 HUF / year.

 

Home savings fund that can also be used for a home loan prepayment

Home savings fund that can also be used for a home loan prepayment

Where the state provides 30% subsidy per year (minus the interest on the loan, since most home savings have virtually no interest rates these days.). Every four years, I receive nearly $ 300,000 in subsidies per apartment. If 4-5 contracts can be opened in the family, the state subsidy is HUF 1.2-1.5 million every four years.

However, let’s not be fooled: the things listed above are only a real financial gain if we can’t otherwise use the cafeteria for better things, if we can’t take advantage of volunteer funds or use government subsidies for home savings.

It can be seen from the above that, with current interest rates on loans, we may be better off with long-term mortgages, but we will not become millionaires. We need to get the calculator out for our total profit and whether it’s worth it. (In premium government securities, you are well off if inflation dries in the next few years while your interest rate on the loan does not change.)

But even if you are into such an attempt, be very careful, because you can burn yourself badly if you do not care about the risks that exist even if you are unaware of it. I could tell you about people who borrowed money on their existing house in 2007-2008 to turn the money on the stock market well. The biggest pitfalls were those who took out a Japanese yen loan in 2008 to invest in the Chinese stock market through unit-linked insurance. Unfortunately, I have met many of them during counseling. Don’t do that stupid thing.