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How to avoid debt traps? Do not lend yourself to needlessness.

How to avoid debt traps? Do not lend yourself to needlessness. The volume of debt in the Czech Republic is still growing. Long-term loans for housing are the largest contributors, but also short-term. The Czechs, without fear, borrow not only for consumer goods, but also for Christmas gifts or holidays. By lending money to seeming unnecessary risk falling into a debt trap. Experts advise on loans to think carefully and borrow only in essential cases.

At the end of the third quarter of 2017, the debt of Czech households amounted to 2.09 trillion crowns according to the Banking and Non-Banking Register of Client Information (BRKI and NRKI). More than three quarters of this debt took up the so-called long-term debt of mortgages and building savings loans. The amount of short-term debt amounted to CZK 430 billion, and this year's value increased by 5.9 percent, ie 23 billion crowns.

"Consumer loans totaled CZK 229 billion at the end of November 2017, according to the data of the Czech National Bank. A number of households do not lend themselves to them only in case of necessity, such as a broken washing machine or fridge, but also use loans to raise the standard of living. Frequent reasons for lending are not only home appliances and electronics, but also the purchase of summer holidays, " says Miloslav Kufa (Ramfin).

His words, for example, are illustrated by SANEP's recent consumer survey on Christmas shopping. Nearly a quarter of the respondents said they intended to invest between five and ten thousand dollars to buy gifts. Due to the purchase, 7.4 percent of respondents were willing to borrow. Compared to 2016, it was 1.2 percentage points higher and 2.9 percentage points more than in 2015.

Learn how to save your unexpected expenses from the reserve

Excessive indebtedness, according to Miloslav Kufa, is a frequent disaster. In order to avoid his household, he is required to learn to use his money properly. Fundamental to this is the realization that it is necessary to have a certain amount of money in personal or family finances. "Generally speaking, everyone should keep a financial pillow equal to at least three times their monthly income. Put aside should be possible each month at least a quarter of revenue. If this is not possible, the family should look for a savings or additional source of income. Today, when there is a huge demand for workers, it may not be difficult at all, " says Miloslav Kufa.

Consider the loan carefully and compare your offers

If the household gets into the situation that the reserve to cover the planned costs is not enough, it is appropriate to consider the purpose of the loan properly. The fundamental question everyone should ask is whether the thing or product really needs it. If the answer is yes then you need to consider carefully who and under what conditions to borrow money. "The offer of super cheap loans lends itself to us from all sides, but not all offers are completely transparent. Consumers should always have an overview of what the amount of the repayments will be, how much they will pay, and what penalties and fees are there, " says Michael Pokiser (Ramfin).

Pay attention to overdraft and credit cards

Many banks offer their clients the option of setting up a credit card or overdraft credit. On the one hand, this is a handy way to have a financial reserve, but on the other hand, you have to be aware that the money is never yours and it is still a loan. Fifty-day and longer interest-free periods are tempting to buy a trip or a new TV, but irresponsible purchases, according to experts, are on the way to debt trapping. "Frequent is the situation when the cardholder ends regularly in a minus and starts getting repayment problems. In the worst case, he slips his wedge through the wedge, creates additional cards to pay the debt to the existing ones or borrows debts elsewhere, " adds Miloslav Kufa.

Source: tz, edited editorially

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