Home loan is more expensive than it seems

The home loan may seem relatively cheap at the moment, but appearances are deceptive. Despite the fact that the banks offer low interest rates, on the other hand they earn more than enough, since there is a considerable margin. The interest that one has to pay is currently extremely low, so it is no problem to adjust the interest on home loans downwards. Keep in mind, however, that people are anticipating rising interest rates and that interest rates will therefore never fully fall in line with current market rates.

 

3.8 – 4% interest

home loan

Borrowers have the option to indicate the rate at which they were able to take out a home loan. That helps others in conducting sharp negotiations, but it is also an interesting indicator of the state of affairs. It appears that in many cases banks are willing to offer an interest rate of 3.8 – 4% on a home loan with a term of 25 years. That seems a low percentage, but it is still a lot more than the interest that the banks are currently paying to get money.

 

Annually adjustable interest formula

Annually adjustable interest formula

The interest rate within an annually adjustable interest rate formula is much lower, but on the other hand, the banks earn much more from it. It is possible to pay approximately 2.5% interest, which makes it possible to take out an advantageous home loan. However, it is the banks that benefit most, since the reference index for that credit formula is currently barely 0.097%. This means that the banks have a margin of almost the full 2.5% and have hardly any costs in that regard, while the home loans on the other hand do generate money.

 

Rising interest

Rising interest

The relatively high interest rates (compared to the market interest rate) on home loans with a duration of 10 or 25 years can best be explained by looking at ‘funding costs’. Such a long term means that the bank has to ‘refinance’ the money at a certain moment. There is a good chance that the interest will have become a lot higher, which means that more costs will have to be incurred. The banks are already anticipating this by raising the market interest rate as it currently exists by a certain percentage in order to be able to cover the higher costs properly later.

Rules that can solve a major problem in the consumer credit market

When a negative answer is received due to excessive financial obligations or debt, the resident tries to borrow elsewhere. And sometimes it works, according to specialists from General Financing and Best Finance. They believe that the new amendments to the Consumer Credit Law are not aimed at limiting such cases and that they will not solve the problem of over-indebtedness.

Among the recent changes in the law

loan law

Only one point has the clearest link with responsible lending. It is an obligation to assess a person’s creditworthiness by verifying the accuracy of the information provided by the person. If the problem has been labeled as debt, then the measures must be targeted. First and foremost, it is one-size-fits-all enforcement of the law. Second, operational enforcement of the law. The infrastructure needed for responsible lending is there, ”says Andrius, CEO of Best Finance, a credit bureau.

According to General Financing and Best Finance, 79% In cases where applications for funding were rejected by General Financing, residents turned to other financial institutions for funding there. 52% received credit from them. According to the study, 24% of the contractors later became debtors and 76% paid on time.

General Financing does not provide more than 50% of consumer credit

interest rate

 The main reason is too low a person’s income or too much financial liability already existing. According to Konstantin, CEO of General Financing, he should not receive credit from other financial institutions without a consumer credit in the company he manages, in a responsible market.

“Statistics show that a negative response from a company conducting a responsible customer solvency assessment does not stop people from willing to lend and more self-assessing their financial capabilities. These people are no longer eligible for consumer credit, but some still get it because they turn to irresponsible companies.

The consumer credit market can be cured by three simple rules

The 40% rule and enforcement. This rule requires that the financial obligations of residents should not exceed 40 percent. from their monthly income.

Prohibition of granting loans to persons who are already in arrears. Currently, such a provision is not explicitly enshrined in law.

Mandatory verification of financial obligations at the credit bureau and reporting. Currently, any consumer credit institution that operates responsibly can verify that a person is not over-financially liable. Irresponsible companies not only do not check such information before granting consumer credit but also do not provide information about their credits to responsible companies, thus limiting the ability to correctly assess the customer’s obligations.

“Compliance with all three rules is already in place and the necessary measures are in place. We have a SODRA database to implement rule one, and the credit bureau compiles a credit history to help you comply with the other rules, says Konstantin Balakin. “Offenders can be disciplined now, waiting and delay will only exacerbate the problem.”

Credit history can save thousands of dollars

The Swedbank Institute of Finance estimates that a mortgage borrower with a solid credit history can save up to $ 10,000. dollars. By comparison, the average salary earner earns such an amount over a year.

Head of the Swedbank Institute of Finance, having a home loan above the average loan amount ($ 55,000) will bring even more credit. It is therefore recommended to look for improvement and maintenance responsibly.

“For many people, for a variety of reasons, those who do not have the best credit rating will shake hands: I am still poorly rated by credit institutions and still struggle to make timely payments. However, when these people start paying their premiums on time, they will improve their credit history in the long run and eventually save, ”says CvilikienÄ—.

That financial discipline eventually pays off

That financial discipline eventually pays off

Is further illustrated by a financial expert. Lending a car 5 ths. A good credit history saves you $ 500 and a down payment of $ 10,000. up to 1.7 thousand. dollars.

According to the head of the Swedbank Institute of Finance, depending on the risk profile of the customer, based on the credit history and the data available to the banks, the customer can save up to a quarter of the interest payments.

Andrius Bogdanovich, head of Good Finance, a credit bureau, said people are increasingly aware of these opportunities, but many are concerned about them too late. “There is a growing awareness in the public that good credit history creates the conditions for more favorable financing. Citizens are wondering how to keep it tidy or repaired, but usually only when they are ready to take out a loan. I would advise you to focus on a few key points before and before borrowing. They will save you thousands of dollars, ”comments the head of Good Finance.

Take a look. If a person does not know exactly what their financial situation is, it is difficult to change anything. It is therefore recommended to consult your credit history report, which is provided free of charge on a yearly basis through the My Good Finance self-service system. The study shows that 76 percent. Consumers start to become interested in their credit history only after banks, leasing, consumer credit or telecommunication companies reject their credit application or hire purchase.

Borrow moderately and moderately

Borrow moderately and moderately

The Bank of Lithuania proposes a 40 percent rule. According to it, you have to calculate to spend up to 40% on loan repayments and interest payments per month. of regular income. The Swedbank Institute of Finance recommends that this share be further reduced by up to 30 percent. If your credit history is strained by excessive financial commitments or excessive borrowing, it’s time to think about lowering your credit appetite.

Do not overlap liabilities. If you see that you are unable to repay your loan or that you are late, consult your bank or another creditor for a loan deferral or other solvency decisions, but do not take a new credit to repay your previous installments. There is one exception – when a financial institution offers to refinance its existing loans on more favorable terms.

Do not borrow for a down payment on the loan

Do not borrow for a down payment on the loan

Banks are right to require home borrowers to have 15 percent. its value down payment. Not only will you try to borrow it from another bank or credit institution, it will not only worsen your credit history, but also place an excessive financial burden on you.

Cover any overdue payments, if any. You have a record of overdue payments in your credit history of $ 240K. population. Of these, as many as 27 thousand. late payments of up to $ 10. The sooner you cover them, the sooner your credit history begins to repair.

“Starting to improve your credit history will not only pave the way for a future home loan or new car lease, but you will also have long-term habits of paying down,” adds J. Cvilikiene, Head of the Swedbank Institute of Finance.

How to improve your credit standing?

Regardless of what type of loan you apply for, the bank will check your creditworthiness and history in a Credit Checker in the process of processing your application. When applying for a small loan, we usually don’t encounter any major problems in this matter.
However, if you plan to take out a housing loan or a larger cash loan (or consolidation loan), it is worth analyzing your financial situation and checking your creditworthiness in advance.

Its significant understatement can be affected by many aspects that we didn’t even think about, such as a credit card we have and not used, or seemingly innocent television installments. We have a real impact on improving our creditworthiness.

Cancel your account and credit card limits

Cancel your account and credit card limits

We often decide to apply for a credit limit or a card, although we do not actively use them on a daily basis. For many people, these financial solutions provide security in the event of sudden, unforeseen accidents. Unfortunately, both of these credit products (even if we do not use the limit granted to us) cause our creditworthiness to be lowered.

So if we want to apply for a consolidation, cash or mortgage loan, let’s go to the bank first and give up the credit card and the bank account limit. In this case, the situation is completely different than in the absence of a credit history where it is advisable to set up a card in order to build a positive history in Credit Checker.

Pay off all loans

Each open financial liability decreases our creditworthiness. Let’s try to repay all current cash loans before you apply for a loan for the flat or for any purpose. We can overpay the remaining installments until the end of the loan agreement and close the loans or wait a few months until we pay the debt according to the current schedule.

If this is not possible, because we will not be able to repay the whole liability at once, and the loan is for a longer period (4-5 years), then let’s try to repay two installments at once for at least some time. Each dollar less to pay back increases our current creditworthiness.

Do not submit multiple loan applications at once

Do not submit multiple loan applications at once

Many people wanting to get a mortgage as soon as possible, at the same time applying for it in several different banks. This is an error, because each such application is visible in Credit Checker as a credit inquiry and causes the borrower’s point value to be underestimated (scoring in Credit Checker is lower). Act wisely. By using publicly available tools, such as loan comparers or calculators.

Choose 2-3 bank offers that suit you best and apply for them individually and in turn. Perhaps you will receive a positive credit decision already in the first bank and for further applications, you will not have to submit at all.

If you are interested in a loan, you should contact a loan broker who knows the applicable banking procedures, loan offers and the possibility of obtaining financing from a given bank. Often, the decision is negotiated at the decision-making level, which is why the client has no unnecessary queries in the Credit Checker.

Pay all your obligations on time

Pay all your obligations on time

It is not only about loan installments or shopping installments that you are currently paying off, but also gas, electricity, apartment, telephone, Internet bills and even parking tickets or free-riding trams. Any overdue payment will spoil your credit history in a Credit Checker or is recorded negatively in BIG. This will adversely affect your credit standing. The matter will get even more complicated if you hit the list of debtors in KRD. Keep your finger on the pulse and avoid such situations.

Check your data in the Credit Checker.

Unfortunately, there are delays and mistakes everywhere, also in the Credit Information Bureau register. So before applying for a housing loan, it is worth registering on the Credit Checker.pl website and download the “Credit Checker report”.

It may happen that an institution from which we once borrowed money entered incorrect data or that the bank loan we repaid long ago was not closed in the register (some banks and financial institutions update their clients’ data quite slowly). Let’s make sure that the information about us is true and current.