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Amortizar créditos ou investir? Veja a solução

Consumption of credits or investment? see the solution

At the end of July, Portuguese banks had €82.7 billion in deposits from their customers in their vaults. The data was disclosed by Banco de Portugal (BdP) and represents the highest value ever and an increase of 7.2% over the same month in 2021.

An amount that can lead the Portuguese to make a decision: to pay off debts – related to credit, i.e. housing – or to invest in a financial investment. But before making any decision, do the math because it is not always easy to choose the best solution.

Between consumption and investment, the consumer is always able to save, either through the interest which he ceases to pay on credit, or through investment gains. Of course, in the first line of the analysis should be the family profile and what it values ​​most: whether it is a reduction in fees when paying off a mortgage or personal loans, whether it is security in the future.

In the case of mortgage loans, given the low interest rates currently in place, in most cases it is not worth repaying, especially if the spread is very low – a common situation in loans taken up to about five or six years ago.

In this case, the money will pay off more when invested in a risk-free application, but the challenge then is to find the product with the best rate of return (see column on the side). However, if the price of Euribor rises, amortization may become the best option. In the case of personal credit, it is always better to amortize it, due to the higher rates of interest applied.

How to compare prices The first golden rule is to annually compare interest rates on credit and the investment product, since the situation can change in a short time.

The formula is simple: analyze the interest rate applied to the credit – TAN (the index rate plus the spread) – and also take into account the application rate you intend to offer, TANL (net nominal annual rate). To better understand this analysis, consider your TAN for credit as the cost you incur for credit and TANL as a gain obtained through investment. Knowing the two rates, choose amortization if TAN is higher than TANL, insofar as the savings obtained in the interest accrued on the loan are greater than the return on investment.

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If you have a fixed rate mortgage, in principle, you do not have to worry about price discrepancies, as a result of the high Euribor, which makes the comparison easier. However, you should keep in mind that in this case, the early repayment fee is higher: 2%, compared to 0.5% for variable rate credits.

If you repay part of the debt, it must coincide with the due date of the installment. If the reimbursement is paid for by death, unemployment or professional travel, it is exempt from commissions. Banks cannot impose additional fees or maximize the penalty on contracts that provide for a lower percentage or exemption. These rules are valid for new and old contracts, for buying, building, working in private and permanent housing, secondary or renting and acquiring land to build your own home.

After all, if you pay 20,000 euros in part, the commission cannot exceed 100 euros on a variable rate credit and 400 euros if you have a fixed rate. You have up to seven business days to inform the bank, by registered letter with acknowledgment of receipt.

However, if you have a home loan with a variable rate and a spread of up to 2.5%, choose to invest the money in a risk-free application (see column on the side), taking advantage of interest to increase income. In the case of personal credit, amortization is always the best alternative.

Products to invest without risk

Annual returns of 3%, 4% or even 5% on guaranteed capital and low-risk savings products are a thing of the past. The interest that is currently being charged is at a small point and there are banks that no longer compensate for term deposits. Still, look at the alternatives.

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Term Deposits

If the simplicity of this savings product is one of its features, then the bonus rate offered makes the application less attractive and less attractive. Although it has lost a following in recent years, it is still one of the favorite savings tools of the Portuguese.

Declining monthly incomes of consumers, competition from other savings products, and reductions in wages exercised explain this downward trend.

savings certificates

This product, which in previous years was considered a real alternative to saving, lost more and more ground due to the low rate of return. This is calculated based on the three-month average Euribor values ​​observed in the previous 10 business days, plus 1%. But count on small rewards.

Growth savings treasury certificates

The rate of interest is increasing: in the first and second years, 0.75% (gross pay) is paid, which rises to 1.05% in the third year, 1.35% in the fourth, 1.65% in the fifth, and 1, 95% in the sixth until It reached 2.25% last year. The interest rate is increased from the second year at a premium, depending on the average real GDP growth (GDP).

Investment Tips

1. Take into account the unexpected

Generate additional value income. Before investing, think about whether you really need this money. If you come to the conclusion that you don’t need it, you can start applying that extra money in order to get the most out of it. Don’t forget that you should set aside money for three to six months of household expenses so that you can deal with any unforeseen circumstances. This is the case, for example, for health care costs.

2. Long-term investment

Stock market. Always think long term, especially if you are considering betting on the stock market. The explanation is simple: the more time you give to your investments, the more you will be able to take risks and, as such, the more you will be able to generate income. You should invest for at least five years – ten good years, 20 better – so that the amount invested in stocks is maximized and temporary losses can be minimized.

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3. Avoid investing everything in yourself

Diversification of investments. Not putting all of your eggs in one basket is one of the golden rules that you must follow when considering investing. This means that you should not only own one security or the security of companies whose profits depend on similar businesses. If there is a change in the legal system, your assets may undergo profound changes.

4. Don’t bet on what you don’t understand

Information. If you don’t understand the product the company is selling, don’t buy stock. If you want to invest in public debt but don’t understand how Treasury bonds work, buy savings certificates. If you do not understand the investment policy description in the fund’s prospectus, do not subscribe. If the deposit given to you contains a formula for calculating the interest rate, exchange it for a simple deposit rate.

5. Avoid getting into debt

Compare suggestions. It’s a fundamental sin of the investor: fund yourself for the sake of investing. If the value of your investments decreases, the credit will have a multiplier effect of the loss. If your investment goes up, the credit dampens the effect of the gains. Whatever the outcome, investment loans will never have the desired effects in the first place. There is only one entity that always wins: the bank, whether the investor wins or loses.

6. Take into account the profile

risk or not. If you have a conservative profile, the investor intends to keep the invested amount and choose low-risk products. If you are moderate, then you are already willing to take a big risk in investments and your choice would be, for example, in real estate funds. If it is dynamic, it has high stakes in solutions and bets on stocks.

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