Promotional Housing Loan – According to all indicators, Hungary has entered the second golden age of lending in the 21st century for some time, which means that more and more people are borrowing. One of the indicators of this process is the low interest rate environment, which can be considered very favorable. But where do the banks seek to die for themselves by promising interest in each other?
Hidden traps in promotional home loans
When we ask the bank for a home loan offer, we typically receive interest rebates depending on the amount of income and / or money that they have received on their current account. At the moment of signing the contract, this is a promise on your part and the bank is willing to believe it.
You can believe it, because he actually bets you to break your promise! In that minute, as you can’t get the amount of money you have taken into your account, it immediately removes the discount from you. There are banks that reset as soon as you fulfill the conditions again, but the feature is total withdrawal.
That is, they have lured you with a very favorable offer within the bank and then lose the discount if you can’t keep your promise. Things can happen in the following years:
- you become an entrepreneur and “forget” to transfer money
- you will be unemployed temporarily
- your income decreases
What does this mean in numbers?
On the chart we can see that if, in the example, we can only pay 120 000 HUF in 5 years instead of the promised and completed monthly 300 000 HUF, then our loan will change:
- the total refund will be more than 1,187,100 forints
- the monthly installment will increase by HUF 6,562 per month
- our interest rate will be 0.6% higher
The bank accepts this. Think about the fact that the bank has 10,000 customers, who are affected by this bet at the same time. And 57% of customers are unable to fulfill the terms and conditions! Then, according to the example, the bank’s extra profit is 5,700 customers x 1,187,100 HUF average difference = HUF 6,766,470,000, ie nearly HUF 6.8 billion. By comparison, FHB’s net sales were HUF 25 billion in 2016 on the basis of company information. That is, with this “bet” a 27.2% of an FHB bank’s annual income can be combined in the long run…
Help me with credit management?
Promotional home loan promotional initial costs
The other typical customer magnet is the initial cost of borrowing with the action. For a $ 20M borrowing price list, an amount of HUF 200-250e is usually written as the cost of borrowing (notary fee, disbursement commission, ownership sheet, valuation… etc.)
Of course, the bank is releasing it with continuous and always renewing actions. For customers, it has become an automatic requirement that they do not want to pay for their borrowing. With this, there is no fundamental problem in a market environment where everyone is acting. But what we need to look out for is the conditions under which we can get that loan.
It is becoming more and more common to hide a 0.5% (for example) interest margin over the best bids behind the initial cost-cutting action, which can even amount to a million differences at the expense of the client over a 20-year term. In exchange for a few tens of thousands of forints initially released, the client signs that he will repay several times.
How to Prepare for a Credit?
The biggest mistake in the calculations is that we record the “current financial situation” and consider it the starting point for the future. In addition, our wallet will often indicate to us that we will not have money. In this case, we make all kinds of promises in connection with saving and managing. So we produce an ideology, hiding behind it, explaining why we want to realize our desire for credit while not having the money to pay back.
I talked to one of my best friends who would like to buy a car. He looks at the repayments and came up with an amount of about 30-40e forints. He asked what I thought. My first question was how much money could you put aside in the last half year?
The answer is frustrating, “nothing”, he said.
I have translated this for what it means. “Nothing” means that it has reached zero every month thanks to regular and unexpected expenses. So in this case, a monthly repayment of 30-40e forints (+ the cost of maintaining a car) would make a huge hole in the budget and lead to a debt.
Of course he was opposed to tightening his belts and making money. In this case, the lab-based laundry mats arrive as: my fixed-cost monthly 60e HUF, I earn 200,000, so it stays at 140, of which 40 is the credit, so it remains 100e even the way I have to live.
This is not the case, since your answer would have been to put aside at least 40e forints each month. And we all know that…
In the case of long-term loans, such as car leasing or home loans, the preparation period may be an interesting concept . I have six months to justify it if it is not entirely clear after the family wallet that we will be able to pay the monthly repayment without any problems.
And anyway… If I think better, who wants to commit for 8-10-15-20 years, it should be able to spend at least six months on their own account, which will be the loan repayment (+ additional costs).
With this technique, we gain benefits such as:
- we can find out what the credit in the family budget would do
- we do not risk anything, we can say that we do not take credit because we see that we will not tolerate
- succeeds in accumulating additional safety reserves. In the best case, we start with the credit that is on our account in case of 6 month reserve problems. So we gave ourselves a 6-month lauf if it was a problem.
- in the worst case scenario, we realize that we are not allowed to borrow and we have collected some amount.
This is still a better solution than having to pay for years of unpaid credit (s)!
Important: the money collected during the trial period is not going to be
- from this we cover the borrowing costs
- let’s go straight to something nice
This money must remain intact in the security reserve dedicated to the credit!