Financial terms and products

Most people are generally aware of what takes place at the bank. The broad outlines are really the broad outlines, because apart from the checking account, the savings account, the loan (e.g. Personal Loan/PL or Revolving Credit/DLK or DK) or the mortgage, many people do not go there. And there’s nothing wrong with that, unless you have to deal with it and you want to know how certain products work and what they stand for. how do you arrive at a certain amount, for example?

Intro

This is one of the many questions we ask ourselves and not every advisor gives a clear answer. It all starts with terminology and there are some basic concepts that are useful to know. The better advisor will explain it in a way that his/her conversation partner understands, but unfortunately not all advisors are like that and just as remarkable, and we don’t always ask about it. Is it a matter of not daring?

Common terms

Let’s start with economics . We all know what it means, but what does the word actually mean? Strictly speaking, it stands for the doctrine of human prosperity or economics. The age-old household budget that was present in many households in the past, but on a large scale. Economics flow from this . And economic stands for economical, thrifty and this relates to (national) economics. State in brackets, because on a smaller scale it can also be reduced to the individual economic situation. How do the debit and credit sides relate to each other? Where debit is outgoing money and credit is incoming money. Borrowing can take various forms and the most common ones are the PL or Personal loan, where you borrow a certain amount at a fixed interest rate and repay it in total in monthly installments. The repaid money cannot be withdrawn again and that makes the difference with the DK or DLK or Continuous Credit. This represents money that can be withdrawn again as soon as the monthly repayment amount has been credited to the account. You need more self-discipline with this type of loan. If you know that this is difficult for you, the PL is recommended. Various lenders have come up with all kinds of variants on these forms of borrowing. Lender stands for an institution that has been authorized (license) by the Dutch state to lend money and does not necessarily have to be a bank. One must meet the standards set by the Dutch state. AFM Netherlands Authority for the Financial Markets is the executive body that monitors this and will impose sanctions if necessary. Strictly speaking , the well-known mortgage represents the real right to real estate that serves as collateral for the payment of a financial debt. The right of mortgage. Depending on the form, it depends on whether the total amount is ultimately repaid or whether a so-called residual debt remains. In principle, the residual debt can never be higher than what the property will ultimately yield. Excessive lending , which was partly responsible for DSB’s collapse, therefore has to do with the value of the property versus the amount lent. If more money has been lent than the value of the home will ever be, you will still have a residual debt at the end when you sell your home. This is apart from the fact that the monthly repayment can be so high (including all kinds of insurance) that it is no longer affordable. Often part of the total amount to be lent is cast in a different form. The savings mortgage is a popular form. You of course pay the monthly interest on the total loan amount, total amount lent, and you also save a certain amount that goes into the piggy bank. At the end of the term , the total duration of the mortgage loan, you will have a certain amount in that pot, with which you can pay off the loan in one go. Or there remains a residual debt that can easily be paid when the house is sold. With the interest-only mortgage, you only pay interest, but the amount of the loan remains unchanged and will have to be repaid with the proceeds from the home. If the home has increased in value over time, what you have left is for yourself. A 100% repayment-free mortgage was often used in the past, but is currently no longer recommended. We also know about the investment mortgage , which has also been negatively reported in the news. On the one hand, because of the depreciation of the pot, the pot that must also be used to repay the loan at the end of the term of the mortgage, and on the other hand, there are often many administration costs without our knowledge. Other guidelines have now been drawn up for this. The annuity mortgage has been out of favor for a long time, but it is now being sold again. You will continue to pay the same throughout the term, but while in the beginning the interest formed the main part and the repayment less, this will reverse over time. We all know about investing (shares) from the stock market and if the stock market rises in points, we also know that the shares rise. In general, a listed company that shows poor annual figures can lose enormous value in no time because the stock market is emotional. If you have shares in it, you will go down just as fast. Heavily speculating on the stock market only makes sense if you are the better amateur and follow it closely or the professional at the various financial institutions that can keep track of it for you and can buy and sell. But you do pay for that. The bond provides a little more security, because the bond is a kind of debt certificate from the state or a company at a fixed interest rate. The enormous gains or losses with shares do not apply to bonds. We also know the savings account in different forms, but it boils down to either you save periodically and receive interest on it, and an account into which you deposit money if you can spare some and receive interest on it. Accounts where you tie up your money for a longer period earn more interest. The lender can then use your money elsewhere, which is not or significantly less possible with money that can be withdrawn immediately. The current account is the account that many people call a private account and where you can deposit and withdraw money with your debit card. Money can be transferred from one account to another via internet banking or the old-fashioned way via transfer forms. In the past, if you had a positive balance, you still received interest, but that was gone just about everywhere. If your balance is negative, you will pay debit interest , which is charged monthly or quarterly. Overdraft or overdraft is a permitted negative balance. Depending on the agreement with the bank, a certain amount must be deposited monthly or you must replenish the account periodically. BKR stands for Credit Registration Bureau, which is located in Tiel, where every form of loan is registered by the various lenders and deregistered when it has been repaid or settled. Not only the mortgage or loan is included, an overdraft on the current account is also reported. The credit card that has credit. Do not pay the full amount every month, but pay an X percentage every month. Furthermore, the credit cards of the various department stores are registered, as well as the mail order companies and, for some time, also the telephone contracts. So almost everyone is registered with BKR and there is nothing wrong with that. What is more important is that if you have a code , you will not be eligible for a mortgage or loan, for example. A coding means that you have had or still have a backlog. Sometimes unjustified, but then a bank, for example, forgot to deregister it. If the coding is correct, it will first have to be completed.

Finally

There are many more terms surrounding products that are more or less similar. But if the advisor tells you something about a product, it is essential that you know exactly what it is. And asking may not always be useful, but it is important before choosing a product. The advisor is paid to sell products, but is the point of contact for the customer in question and therefore the person who must explain everything properly, compare products for you and provide you with expert advice. If you do not trust your advisor, stop working with the bank or ask for another advisor.