A few years ago, it took weeks, months, for a person to disrupt a loan application process, though when it comes to borrowing, often the time is the least.
Fortunately, money is getting easier and faster today: it is in the interests of both parties, as we want to achieve it as soon as possible, and the bank is making the most of it. The regulatory environment has also been added, and technological advances have now made it possible for us to be able to apply for credit from a mobile phone without much effort.
So getting money is infinitely easy, the question is whether it is worth financing our needs with credit. While there are many who have burned themselves bitterly in the past, it must be remembered that credit is just another tool that can be used well and badly. The following will show you why it is worthwhile to consider bank loans as an alternative if you are not able to cover the costs incurred elsewhere and try to highlight when to think about credit.
Really the devil’s toy, or do you fix things? Is it worth borrowing?
You are wrong, who thinks that credit is quasi “free money” that we need to raise when our own wallet is empty. Loan money comes at a price, often not small.
Let’s look at the general conditions that make it a dangerous business to borrow money without planning:
The loan has interest, so we will repay more than the amount taken out. This interest rate is not necessarily constant, for example, for a variable rate loan, it may change from time to time. Therefore, you may have to repay more than your monthly installment, which is no longer in our budget. The cost of a loan is evidenced by the so-called APR. This includes all costs, including interest, that the borrower must plan for the future.
There are other charges when you take out a loan, which we have to pay. Such fees include disbursement fees, early repayment, final repayment, or other administration fees. These are typically fixed amounts or some percentage of the outstanding debt.
What do we pay back then?
Let’s say we need one million forints to pay back over 4 years, so we take a loan for a fixed term of 48 months. With a simple calculator, you can see how much you will repay to the bank at the end of the term. For example, if you choose the first offer calculated in this way, a payday loan from Sberbank Fair, you will see that the total amount to be repaid will be $ 1,285,031. That means our one million forints loan costs 285,031 forints with a 10.97 percent APR.
Of course, for a payday loan, four years is a big time. During this period, unexpected events may occur that prevent us from paying the installment, such as losing our job or being ill for a longer period. If there is no one to pull us out of the trap at this time and we have no monthly reserves to cover, it might be useful to take out credit insurance. Credit coverage insurance provides protection against such situations, and the insurer will temporarily cancel the loan for you. Let us look carefully at the amount of the insurance premium and consider whether this tool would benefit from the cost and the length of the term.
What is a Good Credit Purpose? Freedom of personal credit
Of course, personal credit has more than its downsides. If you invest well, you can reap huge profits, which will compensate you a lot for the costs. But what are the goals for which it is right to invest in credit?
Perhaps it is worth starting with what they are not: unfortunately, for years, it has been commonplace in advertisements to encourage clients to spend on various luxury expenses that are otherwise unacceptable to the family budget. People went on vacation on credit, bought new TVs or replaced their cars without really needing these products or affording them. These credit targets are, of course, incorrect.
However, good credit and the right credit goal make money for us. And a freelance payday loan can be used for anything, so let’s consider this type of loan as negotiable money. Here are some specific examples that might be a good credit goal.