Consumer Credit in Contemporary Market

Friday, June 14, 2019 posted by Joel 9:48 am

Are you thinking of getting some consumer credits to buy a new home? Definitely, you could try these out, However, its better to get proper knowledge about the latest trends of the market.

Consumer credit rebounds strongly in the U, S.A. In the search for profitability niches, banks have decided to bet strongly for this type of loans in recent years. As a result of increasing competition and the progressive decline in interest rates to record lows, the cost of these loans has fallen in the U. S. A to minimums since 2011. The home bank, however, maintains wide margins charging for them practically the double.

Financial institutions have pulled the prices of these products to historic lows, in an environment of slack in the typical banking business -take deposits and grant loans-. with 0% interest rates, consumer credit has become a key way to improve the narrow margins of the sector and improve profitability. The latest data says loans granted previously applied an average rate of 6.73%, a figure that is unprecedented in the statistics prepared by the financial supervisor since 2003. Specifically, for terms of up to one year, the interest rate is 2.67%; for between one and five years, of 7.77%; and for longer periods, of 7.30%. In August 2008, the rate exceeded 11%.

Consumer Credit in Contemporary MarketConsumer Credit in Contemporary Market

In the case of consumer loans granted to households with terms ranging from one to five years, where the average interest rate charged in theĀ  U.S. A stands at 8.28%. In the area, the average interest rate applied is 4.85%. In fact, somehow the figure far exceeds the cost set by the banks of larger countries.

The new credit for consumption is added to more than the families pay back for loans granted previously. Thus, the accumulated debt for this type of purchases and for what the Bank of Spain defines as “other purposes” -which includes loans to self-employed or individual entrepreneurs- has grown again in recent years (from 162,000 to 174,000 million).

In the purchase of the housing the opposite occurs: the amortization of the debt is more likely that the accumulated interest of the accumulated loans of families continues to fall (520,000 million, 2.4% less than in 2016)

In the striking increase in consumer credit – there was only a greater financial backing between 2005 and 2007 – several factors intervene. On the banking side, the massive injection of liquidity by the U.S banks, the setting of the benchmark interest rate at 0% and the penalties imposed by the supervisor on those who do not lend have led the entities to dispose of a lot of money. Also, to face serious difficulties to take advantage of it.

Category : Business

Comments are closed.