Pay back or save? – Consumer Loans

You get a consumer credit at the bank almost in wait. It is a quick solution that can hurt you for years. The bank on consumer credit can earn a decent and you have to pay. What would happen if you exchanged consumer credit for saving? The result may surprise you.

Consumption loans are not the cheapest. Permitted overdrafts and credit cards accompany interest from 15 to 19% pa They are the most common loans and are very easy to access.

Consumer loans are also not the cheapest

Consumer loans are also not the cheapest

Consumer loans are also not the cheapest. You can find them exceptionally with interest below 5% pa, but these are rare cases. Most of the existing consumer loans can be found with interest rates from 8 to 20% pa , exceptionally more. I come from the numbers I meet in practice.

I only selected the 3 largest banks. Their shareholders have nothing to complain about. Banks earn and generate profits in the long run. Part of the profit for the bank is also due to consumer loans.

If the bank tells you that it is better to repay than to save, it is right. However, she forgot to add that in most cases it is better for the bank and not for you .

Savings vs. repayment – comparison in numbers

Savings vs. repayment - comparison in numbers

I offer a specific demo when buying some 10,000 € goods. It may be eg. a car and it can be a home appliance. Basically, it doesn’t matter what money you use. These numbers are flat rates.

If you borrow € 10,000 from a bank with an interest rate of 12% and a maturity of 8 years, you will pay the bank € 5,602.73 for interest. On a monthly basis, you will repay the bank € 162.53 for 8 years. After repayment, you will just get what you bought for it. If it is a consumer thing, it has almost no value.

What would happen if you invested exactly the same amount as the loan maturity? Every month you invest € 162.53 and do it for 8 years. It is exactly the same as loan repayment. You don’t pay an extra penny. What’s the difference? At the end, you will have € 19,136.37 before tax.

For € 10,000 you can buy the same without credit, which in the first case is via credit and you will still stay € 9.136.37. What you do with them is up to you.

How long do you have to invest to get € 10,000 before 8 years? For a loan, you get money now and pay € 15,602.73. If you invested a monthly loan repayment rate of 5% pa, you would need about 4.6 years to do so .

If you put your money in a sock or a bank account with zero appreciation, you would need about 5.1 years to do so . It is still incomparably cheaper than consumer credit.

Buying consumer credit goods is particularly interesting for the bank. For you, this means a fairly decent financial loss. Don’t do it. If you can repay, you can also save money. He won’t make a bank, you earn.

Where to invest if you want a higher return than bank deposits offer?

Where to invest if you want a higher return than bank deposits offer?

And now there can be questions about where 5% pa can be earned . Where possible, mutual funds are. There is a huge amount of them and this is just a few of them.

All of them earned more than 5% pa over the past 10 years, despite the big crisis. There are funds that have earned less and are funds that have earned even more.

What to add in the end?

  • If it doesn’t make sense to pay unnecessary interest on expensive loans, you can instead invest instead and afford more in the future.
  • Consult your financial intermediary for the selection and setup of your investment. Choosing the right funds and setting up the investment is the basis for achieving the desired return.

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