How to manage yourself in the credit world

It is not important to be familiar with all types of loans and their particularities, but it is important to be familiar with the terminology used and the details to be addressed.

One of the main obstacles to managing our own money well is the lack of knowledge of the financial industry products and services we use. Everyone is expected to make use of credit in their lives, and it is important to understand the nature of the credit relationship, the terminology, and all that needs attention.

There are many types of loans available on the market

There are many types of loans available on the market

short-term, medium-term, long-term, special purpose, non-purpose, fixed or variable interest rates, with installments or annuities. It is not necessary for an individual to know the exact differences and specifics of each loan, but to understand the basic nature of the credit relationship – a loan is a money that a lender gives to the borrower for the obligation to repay it plus the amount of interest.

Cash loans are often advertised in the mass media and are often offered by banks to their clients without prior inquiry. They are mainly used to equip a home, a larger personal investment, or some other form of personal consumption, and can be purpose and non-purpose. They are approved for a repayment period of two to ten years. They are offered in various currencies and with fixed and variable interest rates.

They are mostly repaid with monthly annuities – and the annuity is the amount by which the borrower gradually repays the loan over the selected period. Part of the annuity repays the principal amount of the debt and partly the interest. The annuity amount for each period is the same throughout the loan repayment period, and the principal and interest repayment rates change over time.

War and annuity are not the same

War and annuity are not the same

Although colloquially often referred to as an “annuity loan” annuity, this is not true. The repayment in installments is based on the division of the principal of the debt into as many equal repayment quotas as there are repayment periods, and then the calculated interest with respect to the repayment of the principal is added to this.

For example, when you buy in installments (often without interest), you pay off the price of a product or service the same amount month after month.                         

If you take a loan of USD 70,000 and repay it for ten years in annuities at a fixed interest rate of 7.28%, your monthly obligation will be USD 822.90 and you will pay a total of USD 98.747,48. This means that the borrowed money will cost you $ 28,747.48 in addition to the initial cost of processing the loan and notary fees.

Minus current account use rarely and briefly


And minus the current account is a type of cash loan that most banks automatically grant, without customer request, immediately after regular payroll and credit assessment.

Many acts as if the approved current account minus money they can dispose of without too much hassle and expense, so they have a problem. Namely, the interest rate on the approved overdraft is among the highest and can be higher than 10%, and it is calculated on the basis of the daily balance in the personal account. More specifically, you pay interest for the amount you are in minus every day.

As a rule, the current account minus should be used only in exceptional cases and in a very short time, when you expect a very rapid inflow of money to cover that minus. The current account minus should never become a way of life, so use the maximum limit to plan your home budget as it is one of the most expensive loans.

Taking a home loan and achieving financial responsibility is a goal for many. Finding the right property and taking out a loan to buy it is one of the most responsible financial decisions in life and should be approached carefully.

As the repayment time of these loans is long (up to 30 years), it takes more time and attention to understand all the terms and details. Namely, it is not enough to simply handle credit calculators and take into account the amount of the loan, but it is necessary to study all the details regarding the interest rates of that currency, which is difficult for the ordinary citizen.