Understanding the Basics of Banking: Banking Example #1.2: Loan & Deposit Transfer (w/ Colors!)

Image result for loan deposit and transfer art Loan & Deposit Transfer (w/ Colors!)

Example of a loan and deposit transfer. Coloring of cells inspired by commenter Geoff at pragcap.com (an attempt to make it more clear, by matching assets with their related liabilities across balance sheets). Otherwise this is exactly the same as Example #1. Each color represents a financial entity: loan, deposit, etc. Cells with the same color represent two views of the same entity, one from the creditor’s viewpoint (left hand column) and one from the debtor’s viewpoint (right hand column). Example #10 demonstrates how these different financial entities are interrelated but have a degree of independence from one another.

Setup: one central bank (CB), two commercial banks A and B, and one person x. No reserve requirements or capital requirements and everyone’s balance sheet initially clear (empty).

Initial balance sheets (for CB, A, B, and x):

CB, A, B, x

Assets Liabilities
$0 $0

Balance sheets after x takes a $100 loan from A:

Bank A

Assets Liabilities
$100 loan to x $100 deposit for x

 

Person x

Assets Liabilities
$100 deposit at A $100 borrowing from A

Balance sheets after x transfers deposit from Bank A to Bank B:

Central Bank

Assets Liabilities
$100 reserve overdraft for A $100 reserve deposit for B

 

Bank A

Assets Liabilities
$100 loan to x $100 overdraft at CB

 

Bank B

Assets Liabilities
$100 reserves $100 deposit for x

 

Person x

Assets Liabilities
$100 deposit at B $100 borrowing from A

Balance sheet after Bank A borrows $100 of reserves from Bank B and repays CB the overdraft amount by the end of the day (note: Bank A could have borrowed from any other bank, the money markets, the Central Bank’s discount window or by attracting transfer deposits, but I’ve chosen to show the case where it borrows from Bank B):

Central Bank

Assets Liabilities
$0 $0

 

Bank A

Assets Liabilities
$100 loan to x $100 reserve borrowings from B

 

Bank B

Assets Liabilities
$100 loan of reserves to A $100 deposit for x

 

Person x

Assets Liabilities
$100 deposit at B $100 borrowing from A

Note that at the end, the central bank’s balance sheet is again clear, yet there are $100 of reserves on loan to A from B. To see a similar case where the deposit transfer is accomplished with a purchase instead, see Example 1.1.
I recommend this writeup on the monetary system by Cullen Roche for more information. Also, I must credit this article. Also, this site animates balance sheets, and has an especially good macro page with consolidated balance sheets.  Look at this to see this same example with reserve requirements, and here to see it with both reserve and capital requirements.

What is a blank loan? Get the answer here .. РKviklånet.dk

Blank loan is a loan that has been approved and which you can use for whatever you want. In other words, the bank or finance company does not look at what it’s supposed to spend the money for – it’s all up to one’s own. The only loan the broker concentrates on is whether they think they are able to repay the loan or not – if you use the money for a used car, or holding a huge family party is quite subordinate.

Why saw a blank loan in comparison to a regular loan?

Some may not want to understand what they spend their money for and therefore choose a blank loan. It may also be because you may want to buy several things, but only borrow the money somewhere. For example, if both want to travel as well as have a new flat screen TV and a new laptop it may be easier to have a total loan – you may be able to achieve longer maturity than if you choose to finance the thing separately.

Some also choose to use a blank loan to finance older cars – the interest rate is often higher, but you do not have to pay for registration costs and can only comply with the statutory liability insurance on the car. In the case of ordinary car loans, the bank usually has a mortgage in the car and therefore requires a safe insurance so that they are covered if you are so unlucky to completely damage your car.

In relation to a standard car loan, the maturity of a blank loan can be considerably longer – in fact up to 12 years, for example. finance the purchase of a veteran car, which is typically a car that you keep. Blank loan is also used to eradicate old debts. Some expensive account cards in several places, there can be a lot of money to save by collecting the debt in a loan at a lower rate.

Before considering a blank loan, however, consideration should be given.

First and foremost what you are going to spend the money on – if it is a purchase of a new car, it is often cheaper to record a traditional car loan. If it is a loan for consumer goods, it is important to consider how long you enjoy the product you want to acquire. For example, you buy a nice flat screen TV for 40,000 Kr. it is hardly likely that you have the same TV after 10 years – in other words you may risk paying off on a thing that has long gone to death. Likewise, with the financing of a dream vacation – you probably agree with some good memories and some great color photos, but it’s hardly fun to deduct a holiday that took place 2 years earlier.

Of course, the interest rate, maturity and performance are important to know before choosing a blank loan – since the bank does not have collateral in the form of a mortgage or similar, interest rates are often relatively high compared to traditional loans for consumption. An alternative to a loan loan is a cash credit – it is a credit that can be consumed on a regular basis and is also deducted on an ongoing basis. For example, A cash credit of 50,000 kr. buy one item for 10,000 DKK and decide how quickly you want to deduct it consumed. However, you must pay interest on the debt you have incurred. That way, you can pay more on a good month, but perhaps do not pay for Christmas where the budget is often tight.

Both banks and finance companies offer blank loans, but it is usually only the bank that offers a bank credit that is linked to one’s payroll. If you are considering a loan or credit, it’s a good idea to spend some time online to get an overview of the different products offered. Often, you can make online calculations that can simulate how much a loan will cost

 

Facebook loan groups: So risky is that | Samlino.dk

Image result for facebook loan groups

A new worrying way to raise loans has emerged. Private individuals find each other through Facebook groups to exchange loans without the established banks and loan providers. But it can have many consequences if you can not pay the money back.

It has become modern to stand away from the established companies and their services. Several have thus become aware of the alternative options that the part economy has opened up for. The Danes are fine at finding each other and finding a solution without the market.

It may work smoothly. For example, at GoMore, a car owner can rent a car for a period of time to another individual. In this way, we as society use our resources better, so the car does not just stand and collect dust in the garage.

But recently, there has been a great deal of focus on an alternative loan form that has not previously been particularly well known. You can now borrow money through social media, more specifically via closed Facebook groups. In fact, it is so prevalent that there are more than 14 closed Facebook groups, all of which have the purpose of lending money. In addition, we have examined the groups and found that these 14 groups on Facebook all have the same administrator. Pretty nice, right?

This is not just a red flag, but testifies to the fact that it is most likely not just friendly private individuals who would like to help people in need of a loan. But there are more small businesses that systematically lend money to earn money.

Cloudy interest rates can cost you a lot

The typical user on these pages is people in a bad situation who struggle to make everyday living economically, registered in the RKI or who are in urgent need of help. Below is a typical quote taken directly from a loan page.

“I’m acute and lacking 4000kr. Otherwise, I will be thrown out. I have not received housing support yet. I have just moved in and the landlord is not talking. “

Other users may now offer a loan to a pressed person with an interest which they themselves determine. But this is where it typically goes wrong, because loan providers typically set interest rates between 50-100% for first time borrowers. In special cases, the interest rate can be up to 200-300%. These soaring interest rates are far above the interest rate on the most expensive credit loans.

If you are in a depressed situation and therefore take a loan through these Facebook groups, put yourself in a position where you will be able to pay it twice or more back the following month. Therefore, we absolutely do not recommend that you make this kind of loan. Instead, call your bank or compare the cheapest consumer loans through our comparison portal if you are in a bad financial situation.

Be aware before lending money

It is not only borrowers who may risk being exploited in these private Facebook groups. We have talked to a woman who has borrowed money through one of the groups. She says that she has borrowed 7,300 kroner to 3 different individuals with 100% interest. The problem is that she is very hard at getting her money back. Typically, they do not answer or apologize for why they can not pay her back. Therefore, she has chosen not to lend money again.

She also states that even though she has not returned her money, she does not give up whether she should go out and pick them up.

These groups, therefore, are not only a bad idea for borrowers but are also incredibly uncertain for those who lend money. Many of the individuals who are in a situation where they have an urgent need for money may find it difficult to pay back the amount with the high interest rate again. In other situations, some people will take advantage of the easy way to get fast money without having the intention to repay the amount.

This has, among other things, resulted in more loan groups creating posts where they can exhibit the bad payers. One of the loan groups has made a statement with the following text:

“This suggestion is meant that we can all beat bad payers so that we all in the group can chase them together”

At the same time, in this group, you agree that both lender and the rest of the Facebook group must publicize you and your profile as well as contact your friends and family if you do not pay. This means that you agree that people you do not know can come and knock on your door if you are in a situation where you have not paid the amount due. Therefore, we advise you to consider if you have considered borrowing through these loan groups. It can be a big risk to take if you are not sure if you can pay back. In addition, you can find much cheaper loans. You can compare loans through our site and save a lot of money by choosing a lower interest rate.