Early redemption in Credit Financing schemes

Interests charged on Credit Financing

Come to think about the (potential) interests incurred, similar to credit card schemes & individual loans, there are bound to be some forms of extra interest charges when leveraging on credit financing programs. How much exactly is the addition? While the norm for credit card debts is approximately 18%-24% per annum, various financial institution differ from each other as some creditors have bundle promotions or simply cherish their clients by offering lower financing costs. Based on statistics, interests charged on debtors, who leverage heavily on credit, is about 20-30% per month! It is not any small scale!! Those who yearn to achieve high-end lavish lifestyles should really think twice on using credit financier's lucrative cash upfront schemes whereby the requirements are relatively relax as opposed to stringent regulations from professional banking corporations.

Credit financier Modes of Repayment

Under the common regulatory body, association of credit financier, there are several modes of channeling interests back to the relevant creditors. One of the fastest way is through internet banking or known as iBanking. Debtors can simply login their online banking platforms and within a few clicks, transfer the slated amounts to creditors - all in mere minutes & seconds. An alternative to iBanking is automated process namely DDA or GIRO. As debtors need to work overtime, more is better, they might not have the luxury of time with them to perform manual payments. Hence, Direct Debit Authorization (DDA) method is commonly used to allow banks to credit their accounts on behalf to the creditors. The last method available is to send a proxy to repay bills. If the debtor is looking to manually compensate creditors, he/she needs to send a proxy, usually someone whom he/she trusts, to help repay the outstanding loans using cash.

Macroeconomic Incentives & Perks

In this low inflationary environment, according to law of macroeconomy, professional institutions are trying to attract clients to increase the level of borrowings by touting lower repayment schemes as compared to the normal core inflationary standards. When the Federal Reserve calls for low interests rate, almost everyone begins to leverage on cheap credits, and professional workers can no longer resist the temptations to act fast and join the credit financing herd to either upgrade their lifestyles or to improve their financial well-being. The first thing that most workers will do is to buy flashy sports cars and indulge in extravagant expenditures. A lower rate of interests help to pass down savings in credit terms to retail borrowers hence being called as Cheap Credits sloshing around. When retail banks seen the increase in clienteles, being in a competitive market, these corporations will adopt from Central Banks more credit financing schemes, and promote to a broader range of market audiences to capture market share. The vicious cycle continues until someday.. Credit Bubble bursts!

Early buyout in Financing programs

In an event of early redemption from a debtor, who is usually responsible for his personal finances, the bank(s) tend to charge extra interests based on the contributions being pre-paid in advance. The increment is to compensate under-due interests being charged on a longer tenor which the bank(s) suffered from opportunity costs. While some financiers tend to waive off the bills, many are unwilling due to incurring higher expenses over the long run. In fact, banks borrowed heavily from Central Banks and shifted the financial burdens to consumers. If the debtor paid up early, the banks might incur heavy losses instead! No doubt that early repayments are deemed unprofitable, in early stages, but at later stages where the banks had overall profited, it is possible to make redemption towards the end of service. High-end credit financing programs such as costly mortgages and debt-financing loans are encouraged to payoff early due to the risks bankers undertake. These types of loans are supposedly risky in nature hence incentives would be given for early redemption. As it is obvious, different credit financing schemes yield different profit margins & margin of safety.