Saturday, July 13

Is it worth borrowing from banks: features of user credits

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Is it worth borrowing from banks when buying machinery?

The number of consumer loans has increased over the last few years. People take out loans in financial institutions to buy equipment, phones, make repairs in the apartment. Is it worth borrowing from banks at high interest?
According to the NBU, the lending market will continue to grow. Last year the number of transactions with consumers increased by 40%. But at the same time, experts express their fears and warn the population about a possible financial crisis. It may be caused by the decline in the cost of raw materials.
Such a crisis of 2008 and its consequences are still felt in various spheres. It is the credit segment that has suffered the most. Before that, the loan was given to almost everyone, without a thorough check of solvency. Loans in foreign currency were popular. But suddenly the hryvnia collapsed, and people could not repay the money they borrowed.
The IMF recalled those times and warned of a recurrence of the crisis. It will touch on countries that sell raw materials on the world market, and Ukraine is one of them. The situation will reflect less on exporters of finished goods.
Of course, in 10 years the mechanisms of credit granting have changed, the control over checking the solvency of citizens has been strengthened. Besides, the NBU analyses the dynamics in the segment.

Why do people borrow from a bank on large loans?

Convenient tools are loans, which can be arranged in shops. Often loans are given without a down payment, although at quite high interest rates. Despite this, the popularity of such loans is great.
The average consumer loan rate is 45%, it is quite difficult to obtain a loan at 35% and below.
But it does not scare people, which proves the dynamics of the loan portfolio growth. During the year, its volume grew by 44% and amounts to 135 billion hryvnia. But it is still far from the 2008 figures.
The share of consumer loans in GDP is 3.5%. This means that fluctuations and the threat of insolvency do not have a critical impact on GDP.

In most cases, Ukrainians borrow from banks to buy equipment, followed by card loans and loans to buy real estate.
For financial institutions consumer lending is profitable and brings in 2 times more income than corporate lending.
A topical issue for the population is the size of the interest rate. It consists of the cost of money or discount rate (18% of the total) and risk (12%). In Europe, the discount rate is 1%, and the risk is 2%. This difference is due to the stability of the market, which is not yet the case in Ukraine.
75% of consumer loans fall on 5 banks, which is due to low competition of institutions. Despite all difficulties in the segment, the NBU gives a positive outlook for market development.


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