OVERSEAS NEGATIVE RATE COUNTRIES FINANCING EXPLANATION BACKGROUND DEFINITION HOW DOES IT WORK? EXAMPLE CALCULATION PERSONAL HOME LOAN MORTAGE CAR LOAN WITH INTEREST RATE BELOW ZERO NEGATIVE RATE AND BAD CREDIT SCORE
A negative interest rate loan from abroad is defined by a new type of funding facility granted in some countries by overseas lenders such as banks from abroad applying an interest rate below zero.
A negative interest rate loan from overseas means that a bank or a loan broker provide with a credit a facility to a borrower using interest rates below under zero which sound utopic but is becoming almost normal in some countries.
Negative rate financing abroad is becoming a reality, with the consequences that if a person borrows money from lender, he or she will have to repay the principal (the initial borrowed amount) deducted by the negative interest rate.
Overseas negative rate loans have a revolutionary impact on the way how funding is to become in future as it will let borrowers paying back less than they have received.
Let’s demonstrate this new approach through numbers. If an individual applies for a mortgage of 200,000 Euros using a negative rate of 1% per year, his repayment plan will foresee then a reimbursement of a total of 198,000 Euros over a one-year period and even less over a longer period.
NEGATIVE INTEREST RATE FROM ABROAD: CONSEQUENCES, ADVANTAGES, INCONVENIENT.
Overseas implementation of negative interest rates will have a significant impact on borrowers, individuals an entrepreneur as well on savers:
Borrowers will enjoy the negative rates as they will have to reimburse less than they have borrowed.
Savers, on the other hand, will find themselves with less money for their investment since the banks will have to apply penalties which are reflected in negative interest rates.
Life insurance can no longer grant a return to their insurance apart from negative returns which will push some of them to invest in more speculative funds.
WHY ARE THE CENTRAL BANKS IMPLEMENTING A NEGATIVE INTEREST RATE?
Initially the Central bank role was mainly consisting in to maintain a solid and stable currency by containing the inflation using interest rate as regulator for the prices development in a country or a currency zone such as the Euro zone.
In the absence of any inflation which is equal to a poor economic growth and which can lead to a recession, central banks are now trying to create more inflation (more economic activities) in encouraging consumers and companies to spend money not only through low interest rates, but in reversing the rate, in other words: in giving money indirectly.
WHAT KIND OF LOANS ARE IMPACTED BY THE NEGATIVE INTEREST RATES?
The negative interest rate from abroad applies to every kind of funding and financing:
Car loan with negative interest rate.
Home loan and mortgage with negative interest rate.
Personal loan with a negative rate.
THE NEGATIVE INTEREST RATE APPLIES TO WHOM?
The negative interest rate applies to any individual or entrepreneur whose credit score is good and who can prove as usual that he or she is able to meet his or her repayment obligations.
NEGATIVE RATE AND BAD CREDIT SCORE?
Even overseas negative interest rates exclude individuals and entrepreneurs who face a bad credit score and who are usually not able to obtain a funding facility through a classical bank as the negative rates are changing the general risk appetite.