The financial question: loans on margin are often the best solution

Nominal and effective interest rates are distracting usually from the optimum design credit. The investor needs to know how the credit should look like, and he should know the current trading prices of fixed income securities.

When borrowing is two things important. The investor needs to know how the credit should look like, and he should know the current trading prices of fixed income securities because these rates are the basis of the interest rates. Often investors pay but too much money for loans. You have no clear idea how the loans are designed to look and inform too little about the current yields on debt securities.
Worst of all is, of course, the self-inflicted pressure of time. Most financial transactions, such as the acquisition of a property or the purchase of a machine, ran long. Now “only” financing in the bag must be brought. But these are poor candidates for “quiet” talks with the bank. Customers need “urgent” money, and in this situation, lenders have an easy time, both to dictate terms and prices. Here, have some investors, especially wealthy private investors, all the trump cards in order to turn the tables and negotiate with the bank on an equal footing through fair prices, as is evident in the following comparison.

: FAZ Series: The question of property
In between are worlds
It’s about two loans of 100,000 euros. They are to be paid in both cases to 100 percent. The annual nominal interest rate of 4.7 percent per. The fixed interest rate is valid for ten years. The installments are due throughout the end of the month. The loans are alike as peas in a pod so that many people feel that the loans were equally expensive. The payout is equal to the fixed interest rate is equal to the nominal interest rate is the same, and the due dates of the installments are the same.
How do the loans are different from each other? The confusion will reach its peak, though still the effective interest rates are reviewed. The amount per 4.8 percent per year so that the last doubts are likely to be eliminated, that the loans could differ. But this is a fallacy, because between two loans entirely worlds.
Significant effect on the negotiations
The first offer is a loan with low repayment and the right to small unscheduled. The repayment period is 1 percent plus interest advantages so that the monthly rate is 475 euros. There is also the possibility of up to 5,000 euros repaid each year in addition. Is it not exercised at the end of the fixed interest rate, a residual debt of 87,265 euros will be open.
The second offer is also a loan with regular repayment. but the monthly installments of 1,046 Euros are so high that the loan in ten years – will have been fully repaid – at the end of the fixed interest rate. Therefore, in this agreement and no right is to unscheduled. This is for hardcore professionals but no reason “given” to swallow the conditions of the banks. They procure software, take on the role of the bank and expect from the margins.
The calculation is called “transfer pricing concept” and is based on actual cash flows. Here, in part, large differences come out, so that, conversely, there is the possibility of a “uniform” margin to specify and calculate back to the nominal conditions of the loans. In this way, significant interest rate shifts are possible, a significant impact can have on the negotiations.

Like pearls on a string
In the first case, the bank gives the customer first 100,000 euros. After that, she gets 119 monthly installments of 475 euros. With the last installment, the outstanding debt of 87,265 euros is due, so that the bank pocketing that day a total of 87,740 euros. The Institute ranks the 120 payments like pearls on a string and takes out his hand with savings bonds and securities.