Assets Question: What overlook individuals in borrowing

Low lending rates also pose risks to individuals. You should pay particular attention to the term of the loans and the amount of interest on debt rather than on low rates and annual unscheduled.

The current low lending rates are dangerous for many individuals in several ways. By far the biggest risk is the indebtedness due to poor credit rating. The second danger is the long-standing debt when the repayment is too low. And the third danger is the overpricing of loans.

This is evident in the following example: An investor is 37 years old. He needed to buy an apartment, which cost about 200,000 euros and will even be used even 150,000 euros. Loans of this size currently cost about 3 percent when the interest rates for 15 years to be committed. The monthly rate is 500 euros if the repayment is set at 1 percent. That may be tempting at first glance, because the 500 euros may correspond to the saved rent, but on closer inspection is the credit full of pitfalls.

The most sensitive issue is the credit rating of the investor. If the 500 Euros are to lift only with great difficulty, there is a risk that the borrower falls over at the first gust of wind. If the man in five years needs a new car, or in ten years, some time will be unemployed, he can get into financial difficulties. Either the car is not affordable or apartment loan is in default. Also looming in the distant future – specifically in 15 years – the risk that the connection interest rates are higher than the current contractual interest. In a Prolongationszins of 6 percent, the new monthly rate will climb a high probability of at least 719 euros, and the investors may be charged when the fund will bear no more than 500 euros, be fatal.

share working life into two halves

The other circumstances give cause for thought: The investor is 37 years old. At this age, an initial repayment is smoother madness. Lending rates of 3 percent and repayments of 1 percent result in maturities of 46 years so that the private citizen until the 83rd birthday would have to scroll down on the table of bank credit rates. There may be cheerful natures, who see it as a problem, but sober observer will wonder what these borrowers with their money.
If any financial surpluses are available on the monthly loan installment addition, the apartment should not be bought because it exceeds the possibilities of the investor. This inevitably leads to the question of how much money should be for the interest and repayment of the loan available. The answer is simple, but the consequences are difficult. The investor is faced with two tasks: he wants to buy the apartment, and he wants so he has to save up free capital for retirement. Against this background makes sense to share the remaining work life in two halves. It was not until the loan is repaid, then the free capacity is built.

Excessive borrowing rates for flexible repayments

In this case, the investor will work for another 30 years. Consequently, it stands for the two tasks every 15 years available. The specification of the runtime has in a loan of 150,000 euros and a target rate of 3 percent per year total of 180 installments of 1,036 euros result. If the credit rate does not exceed a quarter of disposable income, net income of 4500 euros is required. These are gross Euro 7500, so that clear that low-interest rates may be a gift, but maybe an invitation to people who earn less. Otherwise, the financial collapse is imminent.