Today I would like to return to the topic of the debt spiral, believing that my indications will contribute to greater prudence in making credit decisions. As I wrote before, loans are not bad, provided that the money you have borrowed is used wisely.
In this post, he wants to point out the mistakes potential borrowers make.
When deciding to take a loan, customers of banks or loan companies rely on the assumption that nothing bad can happen to them. They won’t lose their jobs, won’t get sick, etc.
Nothing could be more wrong
We live in dynamic times and even having an indefinite employment contract does not guarantee that we will retain a full-time position until retirement. Not only that, we can receive termination of existing conditions and a change in the amount of income in minus, thereby losing the ability to pay its liabilities on time.
Often in the past, it was particularly the case of people who were paid the thirteenth and fourteenth salary, that they submitted credit applications when they had the highest average of 3 months, i.e. at the turn of the year. These people received much larger loans with larger installments that they could not cope with in the future.
Because then came the changes in the rules of remuneration, there was a reduction in salary and a disaster. So when applying for a loan , you must take all factors into account to avoid any subsequent surprises.
By borrowing money
A significant proportion of borrowers incur bad debts. Bad, because it does not spend its money on things that do not contribute to multiplying their property value. They buy so-called toys they cannot afford, expensive houses, too expensive to use in relation to their needs, expensive cars.
They often borrow to go on holidays, organize holidays. Then they pay back for a year or two, not remembering the sensations they took out for . If you already have to make a commitment, it’s only one that will allow you to grow, for example, let you grow your business.
Store ads and banks encourage long-term loan agreements
Which means that we repay an item whose value is at a certain point lower than the loan amount to be repaid. Example – we buy a new passenger car for 120 months.
And just this our car, after a year loses 30% in value, after another few, it is worth 30-40% of the price.
Some 70% of the value remains to be repaid. Assuming that, for example, a car is depreciated for 5 years, I believe that it should not be credited for more than 4 years. Then we should not be guilty of the bank more than its current value.
Many borrowers fall into a credit spiral simply because they are able to pay installments disproportionate to their income. According to the recommendations of the Banking Supervision Commission, the amount of loan installments should not exceed 50% of income. I believe that installments should not exceed 30% in order to use common sense.