Credit Against Collateral

Credit, mortgage credit, mortgage loan; no matter how it is called, the main thing is what I get from it and everyone else. I do not know like everyone else, but I definitely have credit for something more serious and bigger than all the other words used to describe this phenomenon. But when you think a little more about it, it seems logical. No borrowing for a few hundred euros or even less will really make a loan, but rather a loan, a quick loan or other similar words. The word credit is more related to bank liabilities or very serious amounts. Therefore, it may also be an internal feeling that it is more appropriate and correct to talk about short-term loans, but long-term and large-scale loans that are in their own way linked to banks and a more serious process to apply at all.

 

Loans and borrowings are not a new topic among us

Loans and borrowings are not a new topic among us

but are well known for a long time. Much of society and professionals are blaming credit institutions almost 10 years ago for the economic crisis. It was a chain reaction back then, and so we must be very careful about similar things today – learn from history. Global economic growth followed by real estate boom, further revaluation of real estate in the long term, followed by a significant increase in the volume of loans granted in the United States, further to allow loans to continue to be redeemed and reduced to be considered safer / more valuable and get more money by selling them on the financial markets (this is when private banks sell the loans they own to get a new financier with which to lend the next loans). This process was something new and unknown in the financial markets, so it was not initially recognized as being very dangerous economically. The sale was nothing new, but a product that was sold.

 

Words largest financial markets created a new product

Words largest financial markets created a new product

In very simple words, the world’s largest financial markets created a new product that contributed to the misunderstanding of the true state of credit security. All this, of course, did not happen to us in the Baltics, but it does not mean that we did not suffer from it. The real estate revaluation boom also came to everyone else, as well as foreign banks in Latvia practically representing the entire banking sector, so large financial resources came from abroad through banks, and when the economic crisis was ahead of the door, all financing was cut off. What during the crisis meant that the country had more debts than we could collect. Overall, the crisis was the only time that one could say that only the strongest survived in the banking and lending sector. It was a time when the banking industry was remarkably reorganized in Latvia. Banks became less, fast loans issuer even more and so on.

 

Various credit institutions issue loans

Various credit institutions issue loans

However, despite this, Latvia is still one of the top leaders in terms of the number of financial institutions in the total population. Unfortunately, it is no wonder when there are so many “fantastic” options – quick credit and other information, credit against real estate collateral, credit against car collateral and this list could be continued indefinitely.

I do not know why, but the various credit institutions issue loans – a mortgage against bad credit history – for people who have not been able to repay their previous debts. Of course, for the sake of security, there is now a system where everything is transparent, because it is very important, but it does not change the fact that very often such cases happen. Or, loans are issued to people related to each other and the other person has a fairly high debt burden. In this way, it is very easy to collect quite a large amount of debts for one family and then not be able to repay it.

 

Part of the loans issued will not be repaid

Part of the loans issued will not be repaid

so a mortgage loan was introduced, which would theoretically protect publishers from potential losses that would arise if potential borrowers were unable to meet their credit obligations. Unfortunately, not all have a pledge to be given as a guarantee that the loan will be repaid, so these people have to reckon with much higher interest rates, which will correspond to the risk the financial institution assumes when issuing such a loan. When a loan agreement is signed, one can understand both sides that one urgently needs money and the other that it is very important to secure a safe way to escape potential losses. Regardless of their understanding, it is very important to keep rational thinking when the mind-boggling idea of ​​borrowing goes into the mind. Often, this money is very necessary – for studies, unexpected and urgent operations or similar things, but very often money is taken very thoughtlessly, for example, to buy a bigger house, a more luxurious car, a more modern kitchen equipment and the like. It is always worth asking yourself if I can survive for a while. If the answer is yes, then it is worth considering the terms and consequences of borrowing for a few more days. In my opinion, the most important thing about borrowing is to plan how to repay this loan.

 

Planning properly not just getting a job

Planning properly not just getting a job

I don’t know if I will enjoy it or stay there, but I’d love to buy an apartment today. It is worth planning a positive scenario and a negative one – for example, the positive that everything will be as planned at work, you may be getting a salary supplement and returning your 3-year credit already in the first year. As well as the negative, which could include such unpredictable factors as health problems and large, unpredictable costs associated with it, the economic situation in the country, and so on. If you are confident that even in the worst case scenario it will be possible to repay the loan/loan/ loan over time and without additional complications, then it is worth getting involved. But if there is a lot of uncertainty that could happen if everything suddenly changes, then it is worth rethinking the decision a few more times.

 

I do not want to say that everyone should be given credit in the event of an economic crisis

I do not want to say that everyone should be given credit in the event of an economic crisis

But there must be a clear understanding of the risk associated with this type of credit obligation. Since there is always a contract for this type of transaction, it is no wonder that every friend / acquaintance has someone who has suffered heavily during a crisis, for example, losing his house, just bought a car, etc. Before the crisis, everyone had a secure job, a beautiful vision of future opportunities that led to a large number of loans taken. From this somewhat bitter stage in our recent history, one can understand how important it is to always look at the worse scenario that can happen, especially if the credit is at 5, 10, 20 or even 50 years. I don’t know how I’ll look after 5 years, where else or I will have the same job that today, probably not.

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