Borrow money during the holidays?On February 2, 2020 by admin
The expensive December month is just around the corner. Good Finance, cozy Christmas markets and of course the Christmas gifts for everyone: the costs can add up considerably.
Do you not have enough savings or is your savings account actually meant for something else? Then it is tempting to go red in December or pay for your purchases in installments.
Both forms of borrowing are, however, outrageously expensive because the interest does not lie: an average of 14% when paying in installments and 9% – 13% when the loan is over
In this article, we explain why are red, mail order credits/payment in installments are so dangerous and how you can still wisely borrow money for extra expenses during the festive season.
GFI registration: note!
First a warning. If the need is there, many people still want to pay in installments or take out a mail order credit. But not everyone knows that with loans above 250 USD a GFI registration already takes place. The GFI registers all these loans with the aim of preventing irresponsible borrowing. ‘Hidden’ loans such as telephone credits and standing in red (buying on credit) are also registered, as are payment arrears.
Not everyone is aware of this and may later face an unpleasant surprise. For example, if a (negative) GFI registration suddenly comes up during a mortgage interview. Or if you cannot take out a new telephone subscription due to an (unconscious) payment delay.
According to Sean Cole (partner and director of GFIC), the GFI system is unbalanced and in dire need of renewal. But for now, it is unfortunately still important to be extra aware of a possible GFI registration during the holidays.
Red on your checking account: an expensive joke
Standing red has traditionally been the most accessible loan form, which almost everyone has used or has used. It offers a lot of conveniences – just be in the red and supplement it later with the salary.
But here too there is a snag. The interest for being in the red is sky-high (9% – 13%) and must be repaid within three months: at most banks, customers must have a positive balance at least once every three months. The banks are now paying close attention to this.
Are you regularly in the red and/or is the overdraft even more than half of your net income? Then consider a revolving credit. The interest on this is currently much lower (variable interest from 4.5%) and you have less stress from warnings from your bank.
Pay in installments/mail order credit: duration and unsympathetic conditions
We often see it at car dealerships and at shops: payment in installments/mail order credit. You make a purchase and pay it in installments, at an interest of often around 14%. A quick calculation: with a purchase of 5,000 USD, you, therefore, pay a total of 5700 USD on an annual basis.
At the Mediamarkt there is an extra financial trick: is the duration of your credit longer than one year, but do you want / can you repay early?
Then you will not be rewarded with a smooth settlement of your repayment, but you will pay 1% extra penalty interest! All in all, you end up with an interest rate of 15%.
For information: 14% interest is the legal upper limit according to European legislation. The media market has therefore found a financial dairy cow that even exceeds this legal upper limit.
Continuous Credit: the cheapest alternative with good conditions
If you take out a new loan with GFIC (Continuous Credit, Personal Loan or Combined Credit), you can always repay it early and free of charge. I would like to because it is in everyone’s interest that you are debt-free again as quickly as possible.
Do you regularly need some money? A loan where you can regularly take out an amount that you can then top up again? Then a Continuous Credit is the cheapest alternative. The interest is variable and starts at 4.5%. You can always pay early for free.
And there is another interesting side effect: because you always have money in hand, a (car) seller cannot look into your wallet. If you want to negotiate the price of your new car, you are a lot stronger: you can probably negotiate a better price for the car, under better conditions than when paying in installments.
Merge or transfer loans: cheaper and more overview
Do you currently have one or even more expensive loans? Do not panic! At GFIC we are happy to see if you can transfer it to a much cheaper loan or merge loans into one. Many people do not (yet) know the possibility of rescheduling or merging, but the benefits are convincing:
- You lower your monthly costs (cheaper interest)
- You can always redeem early for free
- You have an overview of your loans in one fell swoop
Personal Loan: overview, clarity and the lowest interest rate
December month is more expensive than expected for most people. However, do not be tempted by too expensive loans during your December purchases. Nobody likes to have debts. And nobody likes taking out an irresponsible loan that will still bother you years later.
However, do you still want to borrow money to pay for your December expenses? The cheapest option is and remains a Personal Loan. You borrow a fixed amount once and pay it back in monthly installments. Ideal for those who can properly estimate the costs of the holidays in advance.
The interest already starts at 3.9% and you can always repay early for free. The amount is paid out in one go and the amounts repaid cannot be withdrawn. That creates overview, certainty, and clarity about when you can go through life again without debt.
Curious as to which loan best suits your plans for the month of December? View our loan guide or view all loans immediately.