Debit or invest credits? see the solution

Amortizar créditos ou investir? Veja a solução

At the end of July, Portuguese banks had 82.7 billion euros in deposits from their customers in their vaults. The data was revealed by Banco de Portugal (BdP) and represents the highest value ever and an increase of 7.2% compared to the same month of 2021.

An amount that could lead the Portuguese to make a decision: pay off debts – credit-related, namely housing – or invest in a financial investment. But before you make a decision, you need to do the math, because it is not always easy to choose the best solution.

Between repayment and investment, the consumer can always save, either through the interest he no longer pays on credit, or through the profit from investing. Of course, in the first line of analysis should be the profile of the family and what it values ​​most: whether it be to reduce the burden of paying off mortgages or personal loans, or to ensure the security of future times.

In the case of mortgages, and given the low interest rates currently applied, in most cases it is not worth paying off, especially if the spread is very low – a common situation with loans that are up to about five years. or were closed six years ago.

In this case, the money will pay off more if it is invested in a risk-free application, but then the challenge is to find the product with the best return (see column opposite). However, if the Euribor rises, writing off may become the best option. With personal credit, it is almost always preferable to write it off because of the high interest rates.

Compare rates? The first golden rule is to compare the interest rates on credit and investment products annually, as the situation can change in a short time.

The formula is simple: analyze the interest rate applied to the credit – the TAN (index rate plus the spread) – and also consider the interest rate of the application you intend to make, the TANL (net nominal annual rate) . To better understand this analysis, consider the TAN of the credit as the cost you bear on the credit and the TANL as the profit gained from the investment. Knowing the two rates, opt for amortization if the TAN is higher than the TANL, insofar as the savings on the interest to be paid on the loan will be greater than the return on investment.

If you have a mortgage with a fixed interest rate, then in principle you do not have to worry about the variation in rates due to the increase in Euribor, which makes comparing easier. However, keep in mind that the early repayment fee is higher in this case: 2%, compared to 0.5% for variable-rate loans.

If you repay part of the debt, it must coincide with the due date of the term. If the reimbursement is motivated by death, unemployment or professional travel, it is exempt from commissions. Banks may not charge additional fees or increase the penalty up to the maximum on contracts that provide for a lower percentage or exemption. And these rules are valid for new and old contracts, for purchase, construction and work in own and permanent housing, secondary or lease and acquisition of land to build your own house.

After all, if you partially repay 20,000 euros, the commission cannot exceed 100 euros on a loan with a variable interest rate and 400 euros if you have a fixed interest rate. You have a maximum of seven working days to notify the bank by registered letter with acknowledgment of receipt.

However, if you have a home loan with a variable interest rate and a spread of up to 2.5%, choose to invest the money risk-free (see column opposite) and capitalize interest to increase income. With personal credit, repayment is almost always the best alternative.

Products to invest without risk

Annual returns of 3%, 4% or even 5% on guaranteed capital and low-risk savings products are a thing of the past. The interest currently being charged is at a minor point and there are banks that no longer reimburse term deposits. Still, let’s take a look at the alternatives.

Term Deposits

If the simplicity of this savings product is one of the advantages, the percentage of reimbursement offered makes the application less and less attractive. Despite losing followers in recent years, it remains one of the Portuguese’s favorite savings tools.

The lower monthly income of consumers, competition from other savings products and the applied reductions in remuneration explain this downward trend.

savings certificates

This product, which in previous years was considered a true savings alternative, is losing ground due to its low yield. It is calculated on the basis of the average of the three-month Euribor values ​​observed over the past ten working days, plus 1%. But count on small rewards.

Treasury Certificates for Growth Savings

The interest rate rises: 0.75% (gross remuneration) is paid in the first and second year, rising to 1.05% in the third year, 1.35% in the fourth, 1.65% in the fifth and 1, 95% in the sixth, up to 2.25% in the past year. The interest from the 2nd year is increased with a premium, depending on the real average growth of the Gross Domestic Product (GDP).

Tips for investing

1. Take the unforeseen into account

Earn extra value. Before investing, consider whether you really need that money. If you come to the conclusion that you don’t need it, you can put that extra money to use to make the most of it. Remember that you should set aside three to six months of household expenses so that you can cope with any unforeseen circumstances. This is the case, for example, with healthcare costs.

2. Investing for the long term

Stock market. Always think long term, especially if you are considering betting on the stock market. The explanation is simple: the more time you spend on your investments, the more you can risk and therefore the more money you can make. You should invest for a minimum of five years – ten years is good and 20 is even better – so that the amount invested in stocks is maximized and temporary losses can be minimized.

3. Don’t invest everything in the same

Diversify investments. Not putting all your eggs in one basket is one of the golden rules to follow when considering investing. This means that you should not own just one security or securities of companies whose profits depend on comparable companies. If the legal regime changes, your assets may undergo significant changes.

4. Don’t bet on what you don’t understand

Information. If you don’t understand the product a company is selling, don’t buy stock. If you want to invest in government debt, but don’t understand how government bonds work, buy savings bonds. If you do not understand the description of the investment policy in a fund’s prospectus, do not subscribe. If the term deposit you are offered has a formula to calculate the interest, exchange it for a simple interest deposit.

5. Avoid getting into debt

Compare proposals. It is a mortal sin for the investor: financing yourself to be able to invest. If your investments fall in value, credit has a loss multiplier effect. If your investments increase, the credit amortizes the effect of the profit. Whatever the outcome, loans to invest never have the securities that were sought after in the first place. There is only one entity that always wins: the bank, whether the investor wins or loses.

6. Consider the profile

Risk or not. If you have a conservative profile, the investor intends to keep the amount invested and choose low-risk products. If you are moderate, you are already prepared to take a considerable risk in investments and choose, for example, real estate funds. If dynamic, it takes a high risk in solutions and stock betting.

Comments are disabled.