Many times we find ourselves in a situation where we want to buy an apartment, car, or even a household item before we raise money for it. In this case, we often turn to the bank. Credit and lending are also good for the economy, as we buy the product ahead of time, and even the bank wins the deal: the economy is spinning. What is a loan, a loan and a lease? Let’s look at the basics.
Credit, loan and lease in a nutshell
- What is the difference between a loan and a loan. Many times I hear someone take out a loan but get a loan, how is that? Unfortunately, the term “borrowing” is very common in the vernacular, which is wrong. You can only actually take out a loan, so if you get money from the bank, you will take out a loan. Interest is payable on the loan. The interest can be fixed or variable, based on HUF or some currency. However, since the last financial crisis, only HUF-denominated loans can be taken out. A loan, on the other hand, means maintaining a credit line, ie that the amount of the loan can be drawn from the bank at any time, even at the touch of a button on the Internet banking interface, within the authorized credit line, without a separate credit assessment and administration. So the loan is a kind of availability: you either draw down all the loans or you don’t, or you take only part of it. In any case, if you don’t actually borrow money, you don’t have to pay interest. There is an availability fee for the loan, which is a negligible amount compared to interest on large sums.
- And what does leasing mean? Leasing is typically used to purchase a car. The point is that you pay the down payment on the car and the bank will make up the missing part. With a lease agreement, the ownership of the vehicle will typically be owned by the bank, and the pedigree will be added to them. At the end of the lease period, in the case of a closed-end finance lease, ownership of the vehicle passes to you by payment of a balance. And if you don’t pay the lease payments properly, the bank will sell your own car. If the car is stolen or damaged in total, the insurer will typically indemnify the bank.
- So the point of a lease is that the object of the lease itself is a guarantee of payment of the lease payment? Actually, yes. At the same time, in recent years, banks have tightened leasing conditions, and it is only possible to lease a car with proof of income. In the end, the essence of leasing has become a bit meaningless in practice, because if the bank is already making a credit assessment, you are asking for a free-use personal loan and buying a car of your own. Of course, if you look at the detailed terms, it may turn out that you can claim a larger amount at a lower interest rate for a lease, but with a lot of tightening, the lease is no longer the same as it was a few years ago. In addition, CASCO is not always a mandatory element of the bank, so the lease has turned out to be a matter of course, as the whole thing so far was that the car was the collateral, now you are essentially in the same place as if you were taking out a loan. .
- What happens if I don’t pay my installments properly? If you fail to pay the installments, the bank will sooner or later terminate the loan agreement (or lease agreement) and you will be required to pay the full amount in one installment! If you are unable to pay at once and have secured the loan with a mortgage, you can also expect the bank to enforce your mortgage claim. So it’s worth thinking carefully about what you need, how much your income is, how secure it is, and how much you can spend on repayment in addition to your monthly base expenses. If you find that the remainder of your expenses is almost completely consumed by the installment of the loan or lease, you better not cut into the whole thing because there is nothing worse than a terminated loan or lease!
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We also recommend the publication of the Magyar Nemzeti Bank, which touches on the topic.