A common problem – for example, in car loan repayments – is that debt-bearing motor vehicles have more debt than the motor vehicle itself: the explanation lies in risky, long-term, unrealistically low leverage and the recent depreciation of the forint. Let’s look at the details!
The majority of car loans
Estimated at 95% of foreign currency-based car loans, were denominated in foreign currency, mostly Swiss francs or euros. The initial advantage of foreign currency loans, the much lower repayment installment compared to forint loans, was lost in parallel with the deep fluctuation of the forint, and they have to pay about 30% more in foreign currency debt compared to the summer 2008 data. Another problem is that customers have taken out a car loan with a relatively low monthly installment over the past few years, while the value of the cars has been rapidly decreasing, thus almost certainly occurring.
More and more car ads are being sold, offering car loans to prospective owners, even surprisingly young, not infrequently just a few months old, as a result of the increasing number of debtors having problems with car loan repayment. This is also supported by bank statistics: the share of problematic car loans has clearly increased in recent months. Therefore
- on the one hand, the existence of customers has deteriorated,
- on the other hand, the weakening of the forint is responsible for the increase in installments.
It can be said that a significant proportion of loaned vehicles
It have more credit than they are worth. According to the recommendation of the Hungarian Financial Supervisory Authority (HFSA) and the Leasing Association, after January 1, 2009, the ideal car loan will be granted for a period of 96 months and the client must show at least 20% down payment. Some banks have introduced further restrictions, while others have stopped providing retail car loans. According to the reports of the Wealthlife Bank, the retail car loan portfolio (about HUF 350 billion) did not increase further.
The lesson: Always take out a loan of such a size and duration as you would expect it to be, and let the family cashier endure a 10-20% increase in installments due to the exchange rate risk of foreign currency loans!