Long-term loan – new opportunities and the inevitable losses?

Real long-term lending in recent years shows a substantial recovery. Once we removed the crisis imposed on restrictions on the timing and amount of granted loans, banking organizations again very actively engaged in expanding the range of credit products. However, potential borrowers before making a large purchase using credit funds, is to weigh all the “pros” and against “.

Before a long-term issue credit should take into account such factors as credit conditions and a detailed calculation of the amount of the overpayment for the use of loan funds. This mini-survey will provide you with the opportunity to make a choice in which the optimal timing of when payments totaling overpayment can be minimized.

Why is it so profitable credit institutions?

The average term of long-term loans ranging from 3 to 5 years, although the maximum can reach 30 years. In contrast, short-term loans, which during the crisis have been blocked almost all banks, a system of long-term lending continued to function, albeit with less intensity.

Long-term credit is considered one of the most profitable for banks lending products, in spite of all the risks associated with it. This makes long-term loans not only commercial, but also investment banks, as well as pension and investment funds.

The main risks are “accompanied by” long-term loans, are non-payment of the loan for a specified period, the fall in the price of collateral, or the death of the borrower. At the conclusion of credit agreements for periods of 30-50 years, such situations are infrequent, yet the losses from such risks far exceeds the total yield of long-term loans.

The basis for a long-term loan is its duration. Dependence proportional – the more the term of the loan agreement, the greater the overpayment on the loan. And although consumer credit does not provide long-term, car loans and mortgages are developing in this direction for a long time. Average interest rates that banks offer borrowers foreign currency loans are issued for more than 3 years are in the range of 8-12% per annum. If you calculate the total amount that the borrower will pay for 20 years of use of the loan, it turns out that under the current tariff rates, he will pay the bank the amount that will be higher than the real value of the acquired property at least twice.

Long-term loan – to reduce losses to a minimum

Established in the domestic credit market situation is such that the long-term credit is not the most appropriate solution. And if you decide to arrange a credit agreement, the main criterion should be the possibility of redemption at any force majeure – by implementing collateral or independently. Analyzing offers various banking institutions use the program for calculating loan – thanks to her, you will be able to compare the real cost of credit in various banks.

Another important thing: before to sign the credit agreement, to determine what form of payment will suit you more. Differentiated system will allow you to gradually reduce the size of the monthly payments and annuity is constant throughout the loan period. However, if you plan early repayment, the annuity payments to you are more profitable.

Credit debt – where they come from?

Since the beginning of last year, consumer lending rates again began to rise. Such a state of affairs many promote active campaigns that conduct banking organizations. Trends in the development of this segment of the loan portfolio suggest a positive trend in the future. But the relationship between banks and borrowers do not always add up rosy.

Institute of bank lending does not stop due to improved adopted legislation and decisions of domestic financial institutions themselves. But disputes and problems between the parties is still there. One of the indisputable evidence of this is the constant increase in the number of late payments on consumer loans formalized. Moreover, experience shows that some credit institutions the rate of occurrence of overdue loans is growing faster than issuing loans directly. As an indirect confirmation of this situation could result in growing like a snowball-size court costs banks – for the last year the cost of this article increased by 140%.

Credit debt – the main reasons

Speaking of the delay, the most vicious in this respect are considered irresponsible borrowers. Quite common are cases where potential customers are not reading it, signed the loan agreement the bank, or read hastily and carelessly. For such borrowers sometimes need to return the loan itself is amazing and incomprehensible.

But the situation may be different, and many reasons for non-repayment of loans is quite understandable. Unpleasant adjustments in the credit histories of many borrowers made the financial crisis. Elimination and reduction of enterprises led to massive loss of jobs, many employees were significantly reduced wages – with all this led to the fact that most borrowers simply could not service the loan processing. On the basis of these objective reasons, many lending institutions have begun to offer its customers a variety of ways to solve problems – among them the extension of loans to the new conditions, restructuring or reorganization of loans.

But these options offer far not all. If the client is allowed or multiple lengthy delays in repayment of the loan, in the majority of banks in response to a request to restructure the loan, he was refused. But conscientious customers can count on the fact that the bank will have their full support. But it also happens that the most responsible borrower is in delay, failing to discuss with a financial institution the ability to change the conditions of the loan agreement. Such cases, banks are considering individually and if the “at fault” the borrower intends to continue to pursue mutually beneficial relationships with the lender, in most cases, is a compromise.

If the banks are to blame …

Dishonesty is found not only on the part of borrowers. Some banks deliberately provoke situations that borrowers are simply hopeless. Unfortunately, credit institutions often require early repayment of the loan or establish excessive interest rates on the loan. You can recall the co-operation “with black collectors,” or visits by security services. Needless to say that such legislation does not approve of the methods.

Borrowers who have got into such a situation, have the right to appeal in court the conditions of the loan agreement or the bank’s actions. And increasingly, the court stands on the side of the deceived citizens. Among the most common violations in the banking sector can be called a fee for opening a loan account, and contract clauses, in which the bank an opportunity to unilaterally change the interest rate on the loan.