It is not an art to borrow money – the trick is to manage it sensibly. That’s why you’ve ever wondered if taking a loan is a good idea? After all, the debt intended for a specific purpose is not bad – provided that it has been incurred on attractive terms . However, before this happens, do everything to avoid finding a financial face!
Credit – take or not take …
Often, the intentions and desire to make your dreams come true are more expensive than your wallet and savings. Therefore, if there is a lack of cash, it is sometimes worth “to take a bull by the horns” and think about financial solutions – especially when you start a family and face the chance to buy or build your dream home. Only, is it worth to be tempted for any occasion – after all, banks and television commercials consciously convince you that it is worth using life here and now! All you need is a loan or a loan. While in the case of cash or consumer loans – borrowing to go on a bad vacation is not very reasonable. In fact, mortgage loans are always made for a specific necessity.
Of course, they only make sense if you negotiate attractive terms with the bank before signing the loan agreement. Because according to the latest report – Poles are more willing to reach for mortgage loans, especially those taken for 30 years. And this brings with it a lot of dangers for the future. The purpose of this article is not to discourage borrowing, but to look at it from a different perspective, which will answer the question – does taking credit really make sense? …
Mortgage is a “necessary evil”? No, but …
Nowadays, few people can afford to buy a flat from their own savings. The vast majority decide on a mortgage. Therefore, if you have a stable financial situation, are not pessimistic and look at the future in positive colors, you can assume that buying a flat for a mortgage is profitable. Otherwise:
- A mortgage loan next to a student one of the cheapest debts on the market and with an appropriate loan period is relatively cheap. For how long is it worth taking a mortgage? Although the longer the loan period, the lower the installment – this option is a trap for the portfolio.
A cost-effective loan should not be taken for more than 30 years! The best compromise seems to be those with a 20-year loan period. The fact is that they are associated with a higher monthly installment, but the total costs will be much lower than for a longer period of mortgage.
In that case, what is the necessary evil? They are certainly consumer debts that are the result of satisfying temporary pleasures. In their understanding, we also mean the debits on the debit account or the limits on the credit card. Read also: How to get out of the debt spiral?
What is the standard approach to borrowing?
- We take a mortgage for the maximum amount the bank offers
- We maximally extend the repayment period, which, of course, reduces the installment, but increases the total cost / or
- A high monthly installment is not a problem, because we assume that in the future we will earn more and for sure: “somehow it will be …”
Meanwhile, reality can turn out to be more brutal – and it does not have to be as optimistic as you assumed. What to do then? At the beginning, you can set the amount of the loan installment.
It is said that the loan installment should not exceed 30% of net income, and the value of the loan can not be higher than 80% of the value of the entire property! Therefore, invest in your own contribution, which will allow you to avoid additional peri-credit costs, such as: buying a low-deposit insurance. Thanks to this, you will also get rid of the higher interest on the loan.
And what about overpaying the loan?
If you are wondering whether it is worth overpaid a loan, it is often a poor solution that involves charging a large commission from the monthly installment – about 1-2%. In addition, the bank may require additional costs for writing a new repayment schedule – or even requiring further payment of monthly installments. Therefore, it is worth having a “stock” of cash in readiness so as not to lose your financial liquidity.
Therefore, if you have not yet taken a loan, seriously consider it!
Before signing a mortgage, write out all your arguments for and against having your own home. Do you really have to buy it, “here and now!” Or maybe you can wait some time and work out your own contribution? When making decisions:
- Use reason and not emotions
- Consider the real estate area – do you really need such a large apartment? Remember that every square meter is lined up,
- Verify costs – not only the purchase costs of the investment are counted, but also its renovation. Check if you have sufficient creditworthiness for one or the other venture,
- Take credit worth a long time – look at the business information offices and investigate if you do not have any debt. Read also: How to check the debt of a private person? Discover the list of bases! Having a positive BIK scoring, the bank may not charge a high margin,
- Conduct effective negotiations with the bank – every 1,000th PLN in the pocket is additional savings. Therefore, do not sign the finished form when the adviser gives it to your nose! Remember that you have the right to think in accordance with the law. At home, take a close look at the entire document with the magnifying glass, including fees and commissions, and read the regulations,
- Do not be fooled by the phrases ” cheapest loan”, “attractive interest rate” – before you decide on a specific offer, compare a few proposals, paying special attention to additional costs, eg insurance, notary fees, legal expenses. Such inconvenient amounts can account for up to 10% of the value of borrowed money!
Do not forget about it too!
- Check the interest rate on the loan – how many times a year it changes its amount and on what terms. The interest rate, which usually appears in bank offers, is Nominal interest rate – does not include all fees, such as commissions, margins or fees for processing the application. The real interest rate is hidden under APY!
- Decide for equal or decreasing installments – what kind of installments you choose depends on your financial situation. Installments equal, in the first years of lending are lower, while decreasing installments – more expensive, but their total total cost is definitely more profitable. Read also: Installments equal or decreasing in a mortgage. What’s the difference?
- With a pinch of salt, approach the promotional interest rate option – if the bank persuades you to take advantage of the offer and argues for a favorable and promotional interest rate – then before saying “yes” think twice about it. Often such interest rate is temporary and accrued only in the first year of loan repayment. And in the long run, with a 20-year loan, it is simply unprofitable,
- Instead of reducing the commission, decide on a lower interest rate – it is particularly profitable in the case of mortgages with a long lending period,
- Check if the contract agrees to take out other loans – very often the banking institutions apply a provision in the loan agreement that prevents the borrower from incurring other liabilities without the bank’s prior consent. Take a look at whether this section applies to all loans – or maybe those that pay high amounts.
When is it worth taking a loan?
The first days of a month or a quarter may be the key moment when you take out a mortgage. Then most banks change their previous offers. Therefore, when choosing the options available, never say “enough to wait …”. In the end you are not sure how the bank’s proposal would later be presented. In addition, you can always transfer the mortgage to another lender! However, before you do so, please wait for the period in which the costs for early repayment of the liability are calculated.