LOANS OR NOT?

"For loans or loans not ..." is usually not an option! Most of us need something to loan for our first car, or even our first house (and sometimes even to get married!) In May, many people do not understand some of the fundamental principles of the bond. Before, to the principles, first to understand some of the key components of a loan.


What are the main components of a loan?
All ready, it is a car loan, loans or credit, which is composed of three main components: the interest rate, security and longevity.



The interest rate

The interest rate is the cost for donors to use their money. The interest rate is usually expressed as a percentage of the loan amount to one year (pa) will be. Interest income is generally based on the composition (ie interest on interest) and can be either once per year / month / day compounded basis (other name is used each year / month / day of rest.)
There are two types of interest rates fixed or variable.



The stills are just that: fixed and immutable. If your fixed rate of 6% per year, of 6% per annum for the entire duration of the bond.
Variable interest rates can change over time and are usually in the context of a market as the basis of loan interest, BLR (BLR = 6.75% current). For example, you can contract Forced May bond with floating interest rate to 1% + BLR. This means that you're willing to pay one percent more than the BLR, ie a total of 7.75% pa



Security
All loans or not. The question is whether the lender you calls for the creation of assets, often referred to as collateral to secure your ready.
If you have a secured loan, it means that your credit will be in a position, includes the use of the guarantee in the event of an error in their lending. Because there is an alternative from the refund, interest on loans, which are lower in comparison to the interest on the loans without guarantee.
If you purchase your vehicle through a bank loan to a tenant (not owners) of the car, you at the controls until you receive your money back and ready to go!) In the case of a loan, the bank has a claim to ownership rights to the house until you have fully repaid the loan housing.

In a loan not guaranteed, there is no guarantee that the bank may close for late payment. Given this risk, unsecured loans are almost always higher interest rates that the loans. For the risks that banks sometimes require that an additional co-signer for unsecured or a guarantee of the loan.
The term
The duration of a loan is the length of time that the borrower must repay the loan. Most personal or car loans are the 3-9 years, while housing loans much larger and can usually take up to 30 years! The term is the maximum length of the borrower to repay their loans, loans can be repaid before the term is (but there are penalties May for the start of settlements!)

What are the basic principles of borrowing?
Since the components of a loan, we are now about some basics of the bond.



Principle 1: Do something for what you need - not want to.

We talked about the difference between need and want, and when it comes to credit, it is important that we consider this difference. You need credit for something you really need, but you do not have the money for the payment. For example, for the purchase of our house to send our children for the purposes of education and to a lesser extent, for the purchase of a car (we speak later).

Principle 2: The bond with an amount, in the capacity of repayment
May appear right direction, but unfortunately it is not customary. A large number of people about their involvement in the debt that the economy continues to expand and the good moments are there to stay. Needless to say that when it comes crunch, these people are fighting for their repayments and car repossessions and seizures begin fungal properties. One example is the crisis of subprime loans in the U.S..

It is recommended that you respect the full repayment of loans of less than 1 / 3 of gross income.
Principle 3: Avoid the loan for the financing of depreciation on fixed assets

This could crush some feathers, but it is a good principle to adapt to. Impairment of Assets are things that lose their value over time, like a car (unless you "invest" in a vehicle), its furnishings and most household and gadgets. It must not be a professor of economics at saying that the bond with a relatively high cost (perhaps even higher than 20% per year for certain articles), these assets are not only economic. These are very fast reduction of the value while you are ready, rather slowly. For defects which are, and you are required to "top up" the lost profits that the depreciation of the assets are not sufficient to cover the outstanding loans.
Try this article on the money from your savings account than the borrowing. If not, do not buy (unless it is common sense)!



Principle 4: Prevention of guarantor
One that is not in the skin of a borrower in the event, for whatever reason, an error. Unless one is willing to fulfill this obligation, must prevent a guarantor.



Principle 5: The borrower has a moral and absolute obligation to repay
Do you have people in your life that are already on you, but not yet to be reimbursed? How do you feel? Frustrated? Cheated? Betrayed? Yes, this is certainly not a very good idea and should never just give excuses not repay your debts as soon as you have a promise.
If you have a problem with the redemption, talk to the lender for a possible new repayment plan, but never to be silent or to flee. If not, do not borrow!



Final
If you take, by all means, borrow! But make sure that you understand the principles before they are in him. Once you take, you are literally their obligation to repay and would like to assure you that as a person, the fulfillment of this obligation at any time.