CreditforForeigners.pl - mortgage in poland for foreigners » Banking tricks that must be approached with caution

Banking tricks that must be approached with caution

Bankers are really smart foxes. Especially those who manage the marketing and product departments. For their purposes, they have large customer databases acquired over many years of operation in the market. Thanks to this, they can get a lot of information about customers, especially about their behavior, preferences, weaknesses and strengths. The conclusions drawn from such an analysis are used to build marketing strategies, thanks to which you can package products so that they look better than they actually are. Yes, a mortgage is an ordinary product. A product is a service or goods that are sold for money. The mortgage loan meets these conditions in 100%.

So where are the standard bankers' tricks lurking? Which parameters should you consider and which you have not thought about before? In today's article "Banking tricks that must be approached with caution" you will learn:

is the bank really an institution of public trust,
how banks cleverly arrange mortgage offers,
why banks make it difficult to overpay a loan,
credit products as a way to get extra money.

1.Bank and banker is an institution and profession of public trust

For years, banks have been trying hard to impress on people that they are public trust institutions, and that their employees are well-trained specialists who first care about the client's interests. By creating a false image, banks want to lull the vigilance, cause selective reading of contracts and cursory checking of competitors' offers. In practice, it is completely different. The bank - like any other economic entity - aims to maximize its profits. The customer's interest, if any, is somewhere there. The personnel base is getting weaker every year.

I have been working with banks on a daily basis for 10 years. Of course, there are honest specialists in real class banks, but in general the real picture is sad. Employees do not know their offers, although they only deal with one product. The main goal is to execute the imposed sales plans, so the "ticked off" customer does not count anymore. There is a very high employee turnover in banks. Today you talk and run your errands with one person, tomorrow he is gone and you have to explain everything to a new employee anew. This in no way facilitates consistent and long-term cooperation with the client.

2.High startup cost, low margin and installment

The simplest banking trick that a lot of people are deceiving. Banks offer great credit conditions at first glance, a low margin and a low installment throughout the loan period. Are you familiar with ads like "PLN 500 for every PLN 100,000 in credit"? Surely most of you have met with them. Unfortunately, it comes at a high startup cost. You think, "What the hell - today I'll pay more, but then I'll make it all back." This is where cool calculation comes in handy, which is really profitable. Bearing a high starting cost in the event of a short loan period or the desire to overpay the loan may be completely unprofitable. Theoretically, the profits may be so small that it is a pity to pay such large amounts at the beginning.

Example

In this case, I will use the example of the ING mortgage. Take, for example, a loan for PLN 300,000, the loan period is 25 years.

Offer with a commission 1.69%, margin 1.69% - installment PLN 1,497, interest PLN 149,114, commission PLN 5,070

Offer with 0% commission, 1.85% margin - installment PLN 1,523, interest, PLN 156,860, commission PLN 0

The difference in costs over the entire loan period in favor of the offer with commission in this case is PLN 2,676. Masochists could argue at this point and prove that they are right. Mommy and an argument for that. By committing funds to the deposit 2% per annum, the annual capitalization of funds from the deposit will generate an extra PLN 2,050 over the course of 25 years. Which loan option would you choose?

3.Obstructing early repayment

Early repayment is greatly underestimated by customers. The vast majority of people first look at the margin, installment, total cost, commission, and only somewhere at the bottom end at early repayment. In my opinion, this is a definite mistake, because properly selected early repayment can generate a lot of benefits, even if the loan price conditions are not ideal. What does a correctly selected early repayment look like? The ideal offer should include the possibility of overpayment by electronic banking or the hotline, the cost of the overpayment 0% and the possibility of deciding whether the loan period should be shortened or the installment lower after the overpayment.

Why do I put so much emphasis on overpayment issues? Taking into account the average cost of the loan, at the moment it can be written that each PLN 1 of the loan costs the borrower PLN 1.65 over the entire period. When taking out a loan of PLN 100,000, you have to give back approx. PLN 165,000. The overpayment therefore offers great opportunities to reduce costs. By overpaying PLN 1,000, you actually reduce the cost of the loan by PLN 1,650. Not much? If you do this 10 times, you gain PLN 16,500.

There is an even more advantageous solution. If your bank allows you to shorten the loan period, the savings are even greater. Each overpayment in the amount of PLN 1,000 may reduce total costs by more than PLN 2,000. So an overpayment of PLN 10,000 will reduce interest costs by over PLN 20,000. These are really big values and I think they are worth paying attention to at least.

4.Hidden costs in the form of additional products

Taking out a mortgage on good or relatively good price conditions requires using additional products to the loan. On the occasion of the loan, the bank wants to earn on life insurance, real estate insurance, credit card or ROR account with a declaration of receipt. All these additional commitments have two purposes. If you use, the bank will earn extra money. If you do not use it, it will also earn, as failure to meet the additional conditions will result in an increase in the margin on your mortgage loan. Some of the contracts are so strict that a one-off arrears in this regard may cause an increase in the margin until the end of the loan term. One mistake in this case means a significant increase in the installment and a gigantic increase in interest. Therefore, it is necessary to carefully consider what we decide on, to compare the requirements of individual banks in every respect. Not only the installment, commission, but also the costs of running the ROR. It is also worth checking whether the declaration of influence can be met in the future, whether the credit card fits our way of life.

5.RRSO - supposedly a parameter that determines the choice of a loan

RRSO, or Actual Annual Interest Rate. The necessity to present this parameter is included in several laws relating to credits and loans. Unfortunately, none of these acts standardizes a single method of calculating this parameter. Theoretically, the RRSO should show all loan costs, so that the customer could easily choose the best, read the cheapest loan offer. In fact, the RRSO does not take into account many different components, e.g. early repayment, comfort of having life insurance, comfort of having certain additional products (account, income from salary, credit card, etc.). The RRSO parameter can be easily disturbed by offering a loan with a high starting cost and low interest rate throughout the loan period. Thus, it is perhaps an indicator suitable for cash loans, but for mortgage loans at most as an auxiliary indicator.

Summary

Banks know very well what they are doing and how to deal with customers. There is nothing to hide - Polish society has a real problem with mathematics and reading contracts, not only banking. Many customers find simple and popular solutions. If you are aware of their existence, you can make a different choice and adjust the loan to your requirements and possibilities. If you do not have this awareness now, be careful that it does not come too late when you notice the first losses. All this results in later problems and the surprise that the final version of the loan is not as originally presented to us.

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.