Advice on loans and financing.

by Erik Vogt

A loan can always be a sensible measure, not in the purchase of luxury goods, but rather in some situations. Because in many cases simply necessary things have to be paid, such as open bills, a renovation at home to guarantee value retention or just a simple car repair. With a loan, people then create a certain financial scope. However, a loan does not always have the desired advantages, because in its literal interpretation the term “loan” stands for trust. For trust, in the willingness to settle existing as well as future liabilities. Such a willingness is unfortunately not always available these days.

Loan is only a temporary use of money or goods

Loan is only a temporary use of money or goods

It is often overlooked that a loan is only a temporary use of money or goods. It is also overlooked that interest is accrued on the loaned amount for this transfer of use, which also wants to be paid back. And the longer the term of a loan, the higher the interest. Because the length of the term also increases the risk of a lender that a customer can suddenly no longer repay his installments. In addition, fewer and fewer luxury and consumer goods are paid in cash these days. People buy almost everything on credit – from urgent purchases to cars to home furnishings and vacation.

In many cases, the risk of funding is no longer recognized, people live in “prosperity on installments”. And in order not to be able to pay the installments in the first place, you quickly take out residual credit or credit default insurance without considering that these contributions are also significant. You should therefore see that you can get rid of such obligations quickly, but without giving yourself an unrealistic time period for repayment. Anyone who takes over with the installments is quickly listed with a negative entry at private credit checker. Today there is also the possibility for private credit checker free loans, but such balancing acts need to be carefully considered. The special conditions to which the borrower is bound are too negative. Because here not only the interest, but also the fees are much higher than with a bank loan.

Millions of Germans are fighting over-indebtedness

Millions of Germans are fighting over-indebtedness

Around four million households in Germany no longer meet their financial obligations. Due to constant financing, most people have a mountain of debt that at some point is no longer manageable. Due to unemployment or changes in living conditions such as separation, divorce or death row, financial difficulties are increasing. There are also many problems with single mothers with more than one child. About 60 percent of all debts are due on arrears, 20 percent of them on installment loans alone. Most fail to recognize that responsible lending must also be matched by responsible borrowing.

It is also often difficult for households to meet the necessary expenses with their income and to build up additional reserves. But reserves are not only recommended, financial reserves and targeted savings plans are also indispensable for private retirement provision if you want to maintain your usual standard of living in retirement. Before each borrowing, you should therefore start with a cash descent, in which all recurring fixed payments are determined. This should be followed by forward-looking financial planning in which you include individual expenditure items in your planning in advance. At the same time, if there are various financial problems, the variable expenses can also be reduced, because these depend almost exclusively on the daily purchase decisions.

If the monthly income is still not sufficient to pay the cost of living as well as the due installments and bills over a longer period despite a reduction in personal living standards, then there is a risk of over-indebtedness. Often, however, (spouse) and close relatives who have signed loan agreements or guarantees, without being able to pay, also become jointly liable. Partners who had to vouch for the other person can request the payments made back. Unfortunately, there is only one problem here: In most cases, the claim cannot be realized due to the main debtor’s lack of capacity. Those affected, who have been proven to have been exploited due to the close relationship to the principal, should in any case seek advice from the local court.

This problem can be seen. In order not to get into a spiral of debt and ultimately into over-indebtedness due to unforeseen life events, not only a high degree of discipline is required to comply with commitments made, but also a far more important and always important aspect: who takes out a loan and thus enters into commitments , should always find out in advance about the costs and the risks. This is the only way to ensure that those affected also create sufficient scope for unforeseen expenses.