Christmas is also a time of gift-giving, when people are more willing to reach deeper into their pockets. In the run-up to Christmas, they often struggle with expenses, which can lead to unhealthy debt. Before reaching for a loan, it is important to understand the costs, conditions and possible impact on the personal financial situation, the Association of Slovak Collection Companies (ASINS) warned.
She reminded that according to available data, the average Slovak’s net financial assets are the lowest in the European Union (EU), and their debt is the second highest among the eurozone countries after Estonia. Family budgets in Slovak households are thus relatively tight. Each additional loan can significantly worsen their situation and lead to insolvency and subsequent foreclosure.
According to ASINS, the basis of healthy financial management in the household is to regularly create a financial reserve that will be used to cover unexpected expenses. People can also draw on this reserve, for example, in the case of Christmas or other holidays. On the contrary, it is not reasonable to get into debt during this period, the association warned.
“The ideal scenario is not to take out any loan for the holidays. If you have to resort to such a step, you should choose a loan that causes as little damage as possible. It is important to consider your ability to pay in advance, perform a market analysis, compare the advantages of various offers and finally thoroughly familiarize yourself with the complete terms of the loan,” explained ASINS President Martin Musil.
According to him, when comparing individual credit products, it is important to calculate the total burden that the loan will cause on the family budget. The most important indicator when choosing a loan is the annual percentage rate of costs (RPMN). “In this case, the cost is the amount that the borrower must pay for the borrowed amount. The APR therefore expresses the total interest rate of the loan or loan. It takes into account not only the interest, but also other fees related to the loan, which are not always visible and clear at first glance.” underlined Musil.
This indicator also includes other fees that many consumers do not think about, for example, interest on interest, one-off fees for the provision and administration of the loan. On the contrary, the total amount does not include, for example, late payment fees, which can make the loan even more expensive, the association added.
