Research (Conseq)
Personal finance  |  February 07, 2013 14:07:10

Czechs borrow responsibly than in the past

Last year, while household debt increased slightly, but much more interesting is to look at the structure of debt. On the one hand representation decreased consumer loans and outstanding credit card balances and authorized and on the other hand, increased representation loans. Based on these numbers, we can say that the Czechs lend more responsibly than in the past. The ratio of household debt varies slightly over thirty percent, which is still well below those of developed Western countries.For example, in Spain, the ratio was around ninety percent. It is not possible to interpret this number so that they can Czech households further into debt without fear, without being beset problems similar to those of Spanish. Still, however, the average Czech pay for the loan, expressed as the APR, much more than the average German. Margins are in the Czech Republic more than 2.5-fold, which also implies lower financial literacy. The padesátitisícové APR loan with 7% repaid five years reimbursed to a total of 10 000 CZK, 20% APR, then 30 000 CZK. So definitely worth it to check with several financial institutions to offer interest rates on loans.Before the loan is necessary to make sure that the situation can not be solved in a better way and carefully consider what the household expenses will mean additional costs in the form of loan installments.

Every household should have sufficient funds to cover your expenses for at least six months. If no such savings, you must create them, so start saving. For these savings is good to set up a separate account to be separate from the money saving on the normal operation.Preferred are subsidized savings accounts, the interest rates of time deposits greater than most on the market. An interesting example is the acquisition of savings vehicle. A car with a price of 150 000 CZK you can either take a loan with an interest rate of 7%, or to save it with an interest rate of 4%. If you can afford to give 2000 CZK per month, then we will repay the loan 99 months while we save only 67 months. If you owe on a credit card with an interest rate around 25%, it is reasonable to repay this debt before I start saving for a savings account with dvouprocentním interest.

Of course there are instances where it is preferable to borrow than save. An example could be a broken roof, which flows into the house. If we waited for the repair will I save, the damage caused by leaking much higher than the interest paid on savings. With low interest rates of mortgage loans is advantageous in most cities of the Republic to purchase housing mortgage than pay rent (if you are going to live in the city permanently). Interesting product are credit cards that offer interest-free period of about 50 days, and often benefits systems. However, they require discipline to have their balances paid on time. Interest expense because they are among the highest.

Certainly it is not reasonable to borrow for new electronics (its price very quickly falls), a holiday or Christmas gifts. The effort to knock out wedge wedge (to borrow for repayment of existing debt) only results in a debt spiral that can not end well.



Vojtech Iron,

Portfolio Manager

Conseq Investment Management, Inc.



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