While in Russia a person is looking for a way to reduce overpayment on a loan, foreign banks lend at 1-3%. This makes the idea of finding options for reducing overpayment relevant, but not for German borrowers. Why give the bank interest, if they can be taken in the bank.
Many people know that loans abroad are cheaper, but now bankers are ready to give money at a negative percentage, as is the case in Germany. Large amounts of such a program can not be obtained, but the fact that the matrix is changing is alarming, when the bank, instead of enriching the borrower, is ready to lose.
Is it possible to make a loan?
Programs with a negative rate a bit, but they are, and in sufficient quantities. In 2018, several German financial institutions declared their willingness to issue money and get back a smaller amount:
- For a while, the Bank portal, which works with the support of SWK Bank, has operated for a while with a -1.5% interest rate. The loan was issued for minor expenses with a return during the year). Then the program parameters were adjusted, and the borrower’s profit increased to 3.5%. At the end of the year, the client should, instead of a thousand euros, give about 980 euros.
- Together with Fidor-Bank, another search portal Smava has declared its readiness to lend at minus 5%. Taking a thousand euros, the borrower returned only about 920 euros.
Such programs are contrary to the traditional view of the bank, if you do not take into account an important parameter – the financial institution will not work at a loss.
Why is a loan with negative interest profitable for the bank?
Credit interest with a negative value did not originate from scratch. The problem is in the ultra-soft monetary policy and the zero refinancing rate provided by the European Central Bank. The commercial financial structure should not return anything beyond the amount that it lent to the Central Bank of Europe.
The call of bankers is to invest in loans and business investments to help the economy grow. In such a situation, it becomes unprofitable to keep money on deposit – on deposits, rates also have a negative value. For private banks, the Central Bank set 0.4% with a negative value as a penalty for keeping money supply without movement, so that creditors more actively participate in the development of the economy.
The only problem is that the demand for credit remains minimal, and in the real sector of the economy the pace is not high enough. For ordinary European citizens it is more habitual to keep funds in a cashless form and pay extra to the bank for custody.
Taking into account the zero overpayment of the ECB, in Western banks there is a wider potential for action on how to make the population more actively participate in increasing consumer demand. The amounts with a negative rate are small, and in return they ask for customer contact information, increasing the potential and current base. Western banks are full of other ways to earn money related to non-banking activities.
If we imagine that a credit institution is forced to pay for keeping funds in accounts, then it becomes more profitable to give money to any client than to spend on interest for keeping amounts without movement.
The easiest lending option is associated with incentives to free purchase of equipment, furniture, other goods. If you use a program with a negative rate, then a person gets a discount together with a sofa or a refrigerator, because the creditor will have to pay less than what was owed. By issuing funds with a negative percentage, the western bank performs the task assigned to it by the Central Bank of Europe, and it will receive the rest of the profit through servicing the attracted customers.
Seeing the loan rate with a minus sign
You should not assume that this is a mistake or an optical illusion. Such conditions are a logical continuation of the goals set for private bankers. It is simply more profitable for Western banks to make money work by transferring the profit zone to the banking service and transaction fees. … And no fraud.