Borrowing or saving, what do you do?

Miscellaneous Player5Level7 August 7, 2016 0 0
Purchases should be financed by both your saved pennies or alternatively by closing a loan for this purpose. But how easy it is nowadays to close a loan? The economy turns bad then increases the chances of losing your job. Ok, the required interest rate for loans is then very low, because Europe and to encourage banks thereby investment. But can you still just get a loan or is it wiser to start saving?

Borrowing or saving

  • The sun rises for nothing!
  • Current Reality
  • Housing and mortgage loans
  • Now borrow or not?

The sun rises for nothing!

Closes really a loan, then it is about the lender that you will pay a rate of interest for it. You will have to pay once you enter into a loan. It is of great importance that the outstanding debt is also repaid. But how realistic is it still that banks lent money actual can get back. In the past it has been found that precisely at the hands of banks' risky loans were granted, eventually the banking crisis was caused. Loans were no longer affordable and banks got their money back. Banks will therefore have to be more reluctant to actually provide a loan. It will be the citizens but also made it difficult in the enterprise market to take out loans.

Current Reality

Banks are in a recession not to jump to enter into long-term high loans. This is because with a few years interest rates without again attract a rising economy. Relatively speaking, banks will suffer losses on their loans with low interest secured during the recession. There is therefore a contradiction, because the long-term banks have less profit while now profit can be turned. Therefore continue lending will be primarily limited to:
  • Personal Loans: a one-time loan to finance an acquisition whereby Planning for interest payments and redemption;
  • revolving credit loans: an outstanding credit which can be used at any time to participate in consumer purchases.

This is because these loans are often linked to a variable interest rate, so the interest rate is always more than interest payments by banks. Or the coverage is guaranteed for the banks.

Housing and mortgage loans

The housing market has only victims if the market plummets. Is it economically poor, are jobs at risk and takes the urge to buy a house down. In addition, holds that:
  • people who want to sell the house to take a firm loss on the sale and that has major implications for first-time buyers. Major losses can mean that there is residual debt arising where possible, the Dutch Mortgage Guarantee or the NHG guarantee will not stand;
  • individuals wishing to purchase postpone the sale precisely because home prices are falling just a home.

In both cases, they would therefore not have to go to buy or sell, because it will create too many losses. Thus, the housing market deteriorates and can also end up in a downward spiral. The banks also have other considerations:
  • the house ie the collateral usually ensures that the mortgage loan is secured. One can borrow up to 106% of the market value of the home, but in a few years, the value of the home is also a year 7% fall. The coverage for the bank is so poor growth in two years to 100% - 100/106 * 6% - 7% * 2 = 80.3% have gone on a mortgage of 106% of the previously established market value. Within a few years of bad housing market the risk is too big to take out a loan. The following applies as yet that the risk to the mortgage lender is greater than for the bank. This is because the bank usually will try to still recover the full amount from the home buyer if payments can not be put through.

Now borrow or not?

Without more for entering into a mortgage loan will be the policy that you postpone the better the market has picked up again. This is especially true for starters. You want does not at the unexpected need to sell your home in a declining housing market, you direct a high residual debt on the purchase must take. To get rid of any remaining debt you talking about a long process of many years of repayments and interest payments. Be smart and save for later, rather than right now to buy a home. If you still want to do a consumer purchase make sure it remains a personal loan. Structured repayments it remains clear until maturity. Imagine thereby also the question whether the consumer purchase now really need, or you can postpone the investment until a little later. Anyone can be so fired up because during a recession, so do you! Be wise and think about your own wallet. Saving is better than to borrow for something you may not need.