Loans in this part of the world are a relatively new phenomenon – in fact, almost two generations did not use them because the economic system was not capitalist. Therefore, it is not surprising that many older people still do not understand, but rather are not used to credit. However, this does not change the fact that quite a few people in Latvia have problems with, for example, compulsive borrowing and the like. In this article, we will try to understand Latvia’s creditworthiness situation and what we can do to help.
What are the most common credit problems in Latvia?
- Bad loans are taken – ranging from consumer loans in the “fat years” of 30-40% per annum to fast loans at annual rates ranging from 200-400% per annum, due to both low income and a bit of wobbling financial literacy are opting for highly unfavorable loans.
- Too expensive things were bought with credit – especially in the so-called “fat years”, many bought poorly expensive homes, which then plummeted in value but had to pay the old price.
The most common mistakes when borrowing loans
- Borrowing without knowing how the loan will be repaid – When you borrow, you need to know how and when to repay. While doing something can work on smaller loans, such as a quick loan of up to $ 50, it is imprudent to take a bigger loan without knowing exactly when and how it can be repaid.
- Borrowing too much is self-evident, but since you can only repay the loan prematurely, borrowing too much runs the risk of being drained of the remaining money while still being paid off.
- Borrow when not needed – of course “need” is a very tight concept. As death escapes,
Why are some of us unable to handle credit?
It is true that most people still understand what obligations they are subject to when taking out a loan. However, in some cases, for people who do not usually have other problems, credit may become the only apparent solution. For example, if for any reason you need money, credit is only one possible solution.
Another issue is, of course, discipline – although it is hardly possible to talk about people in the categories “disciplined” or “undisciplined”, some people are used to avoiding their obligations, while others are more likely to do so. Because credit is a liability, defaulting people can also choose to default. However, credit is a legal obligation, so the consequences may be more visible on the material plane than, for example, in the case of a broken relationship due to debt.
It should also be borne in mind that some people know how to handle loans, but still look like losers in their financial obligations. For example, if someone has taken a high interest rate loan during a boom, he or she will still look like a loser if the annual interest rate falls by 1-2%. But it is rather a failure in terms of global economic processes.