Credit application: Independent broker or your usual banker?

bankAre you considering making a purchase that exceeds your monthly financial means and savings? One thing is clear: you will turn to the credit market.

Will you go to a traditional bank or a specialized credit broker?

Two solutions offering different services.

At first glance, nothing too difficult

Except that since 2012, the economic situation is different. The financial crisis linked to the public deficit of European countries has left its mark and austerity policies implemented by governments have an undeniable impact on the credit market. Indeed, banking activity is now under scrutiny and in this area, one word reigns supreme: caution.

The figures speak for themselves: the number of mortgage loans contracted in Belgium decreased by 23% in March, compared to March 2011. In France, over the same period, the drop is staggering: -47%. The number of credit applications in Belgium fell by 20%. The amount of loans granted also recorded a smaller decrease of 9%. The amount for credit applications contracted by 5% (Le Soir Online, “Decrease in mortgage loans in March”, Thursday, April 12, 2012).

Consequence?

New customers of Crédit Populaire Européen have already noticed. It is becoming very complicated to obtain credit from your usual banker. Banks are becoming increasingly demanding. With this worrying consequence, the number of bankruptcies in Belgium increased by 26% in the first quarter of 2012.

It would therefore not be surprising for consumers who are used to dealing with their usual banker to turn to independent credit brokers to check the conditions of access to credit and the financial terms offered to them.

Independent credit brokers are, unlike banks, credit specialists. Their professional activity is almost exclusively based on granting credit. This is not the case for a bank, which largely depends on investments made with their clients’ savings. In other words, access to credit is therefore much easier with an independent broker.

Traditional bankers are an essential link in economic policy, and today more than ever, they are key players. They are monitored by the Banking and Finance Commission, the National Bank of Belgium, and the government, which legitimately wishes to avoid fiascos like the near-bankruptcies of Fortis and Dexia banks. Consequence? The measures taken by banks are sometimes more “media-driven” than economic. An independent broker enjoys greater flexibility. They accept or reject your file based on objective financial elements rather than a general policy that no longer makes distinctions.

Finally, and it is obvious, your usual banker can only offer you “in-house” products and cannot benefit from the enormous diversity of other products available on the market. An independent broker works with many different financial partners.

At Crédit Populaire Européen, we have over 20 financial partners who will have a different perspective on your application. An independent broker is therefore much more able to take advantage of the competition among financial partners.

Mercedes Class A, a city car in its own right

The Mercedes A-Class has many features to impress. The first of these is its design. The new model stands out with its curved surfaces that highlight its dynamism and striking lines. The vehicle becomes more athletic, the hood less sloping, and the grille as well as the front and rear lights are redesigned. Inside, it reveals its sportiness through ergonomic seats, air vents, and various accompanying accessories.

The Mercedes A-Class features a precise and reliable navigation system. The onboard sound system is powerful, and the possibility of integrating an iPhone, in addition to the Bluetooth module, contributes to its functionality. Driving assistance enhances comfort at the wheel, especially with the drowsiness detection system and Adaptive Brake braking procedure. Safety is ensured by the numerous airbags available onboard and the Mercedes-Benz emergency call system in case of breakdown or accident.

It also adopts Blue EFFICIENCY technology, which combines a high level of performance with environmental preservation. Various techniques contribute to achieving this goal, such as intelligent energy management, ECO Stop/Start function, or aerodynamic study.

How to finance the purchase of an A-Class?

The ideal is a repayment over five years, but given the quality and robustness of the vehicle, financing over 7 years can also be a good solution. The buyer is not obliged to borrow the entire price of the car but only the majority of the purchase price. In this case, they must settle the balance at the end of the contract (residual value financing).

In the case of full financing of the car purchase with a loan, Belgian legislation allows for interest deductions, particularly those related to professional use of the vehicle. With our online simulator available on every page of our site, you can accurately determine the amount of the monthly payments. Here are some examples:

As of June 19, financing over 7 years would cost you €487.70 per month. Of course, you can finance with a down payment, which will allow you to reduce your monthly payments. Take advantage of our brokers’ advice to make the loan best suited to your situation!

Enjoy your ride in your new A-Class!

Car financing with residual value and installment loan

You have financed a car with residual value. You are nearing the end of your credit contract. Therefore, you need to pay the residual value of your vehicle – typically 40% of the value of your vehicle. What options are available to you? Here’s an overview.

Three options available to you

The catalog value of your new vehicle was €30,000. You have partially financed the car over five years and borrowed 60% of the vehicle’s value, which is €18,000. At the end of your 60 monthly payments (five years), you need to pay a residual value of €12,000 (which is 40% of the vehicle’s value).

Three options:

a.    You have the cash and pay the €12,000 outright;

b.    You plan to change vehicles and sell the vehicle for the residual value price of €12,000. You then repay the residual value;

c.     You don’t have the cash or you want to keep the vehicle after five years. You have no other choice but to take out a classic installment loan for an amount of €12,000.

Car financing and installment loan

The APR for car financing is much more attractive than the APR for an installment loan, which is why if your intention is not to sell your vehicle after five years, it is in your best interest to finance the entire purchase price of the vehicle and not opt for financing with residual value.

Why is the APR for car financing more attractive than the APR for an installment loan?

Essentially for two reasons: First, car financing with residual value concerns new vehicles and thus vehicles in perfect condition. Indeed, it is only under this condition that the vehicle will still have an interesting residual value in the market. Secondly, the sale of a new vehicle comes with guarantees that a used vehicle cannot offer, and therefore the APR is higher.

Conclusions

If you want to buy a new vehicle and sell it after five years, choose car financing with residual value. If you want to keep the vehicle after five years, opt for total car financing.

Tax deductions for a mortgage loan

tax deductions

You have recently taken out an installment loan or a mortgage, and the pertinent question of the tax deductions or benefits you may be entitled to arises.

In Belgium, given the significance of the tax burden, looking into tax benefits that could reduce your overall taxable income is essential.

First, it is important to make a fundamental distinction between loans taken out for private purposes and those taken out for professional purposes.

Here is the current state of affairs.

Loans for professional purposes

Under Belgian tax law, an expense can only be considered deductible by the administration if it is intended to facilitate the earning of professional income. For example, the car a doctor buys to visit patients will only be deductible because it allows him to earn income from his professional activity. Conversely, some mixed expenses, i.e., those serving both professional and private life, are only partially deductible.

Thus, a loan intended to be essential for earning taxable professional income will be 100% deductible, including interest. Deductibility is generally spread through an annual depreciation percentage. For example, a car is depreciable over a maximum of five years. This method aims to spread costs over different fiscal years to distribute the tax burden over several periods.

Deductibility of your mortgage loan

In the realm of expenses useful to your private life, the only loan that is deductible or provides tax benefits is the loan used to acquire your first home: your mortgage loan.

In short, the tax deduction works as follows: you can deduct the repaid capital as well as the interest and insurance premiums, but the total of these amounts is capped at a maximum annual amount of €2,120 per person who took out the mortgage. For the first ten years, this amount is increased by €710, totaling €2,830 per person. If you have at least three children, you can add an amount of €70.

These increases are only valid for the first ten years and are only applicable if you are the owner of a single residence.

Conditions for deducting your mortgage loan from your taxes:

  • The loan must be for a single house intended to be the main residence of the family;
  • The loan must be secured with a mortgage;
  • The loan term must be at least ten years;
  • The loan must be taken out with a credit institution established in the EEA (European Economic Area).

Online credit form: length beats precision

online credit

Most credit institutions offering an online credit application form provide their clients with two options.

The first is a short version where only essential information is collected. The second is a longer version where all information that could be used to strengthen the client’s file is collected. Why has CPE opted for a more comprehensive version of its questionnaire?

Features of our online credit application

It should be noted beforehand that submitting a credit application to CPE does not imply any commitment on your part. Only your signature on your credit contract can be interpreted as such.

We have chosen an intermediate configuration for our online credit form to save you time while maintaining the tool’s effectiveness.

It consists of five pages, but some can be skipped. This way, you save time and can send us your application in a few minutes for review and processing.

If needed, we will contact you to request additional information to refine your file and make it as complete as possible. This step allows us to better defend your file with our partners and thus offer you the privilege of benefiting from more favorable conditions. If you have taken the time to carefully fill out all the fields in our form, we will have all the useful information to find the best credit offers for you. Additionally, we can directly focus on studying your file, which facilitates negotiation with our partner banks.

With this information, our brokers can also quickly check if you meet our credit granting conditions.

How to fill out the online credit application form?

Filling out our online credit form is done in several steps. Each time, only fields marked with an asterisk are mandatory.

Phase 1 involves briefly defining your project, its purpose, its cost, and the intended repayment terms.

Phase 2 collects personal information about you and your spouse if you are married.

You then move on to phase 3, where you are asked to provide your contact information.

Step 4 collects information about your professional situation.

Finally, the last step focuses on your income and financial data.

Once all these fields are completed, you click on “Send,” and we begin processing your file.

Do not hesitate to contact us if you encounter difficulties filling out or sending the online credit application form.

Taxation of mortgage credit

tax

Are you considering acquiring real estate? You are going to take out a mortgage loan. Borrowing to acquire real estate is expensive in terms of interest, but you should not lose sight of the fact that the payment of these interests is tax-deductible. Therefore, even if in some cases the buyer can afford to buy real estate, it is often much more advantageous to take out a mortgage loan and deduct the interest from this loan from the property income that is included in your personal income tax return. Here’s an overview of this fundamental question.

Deduction of interest

Interest paid on any mortgage loan is 100% deductible from all property income included in your personal income tax return.

Property income is, for non-rented properties, the cadastral income (for land or the main residence of the borrower), or the cadastral income increased by 25% for other properties owned. For rented properties, it will be either the cadastral income or the actual rent received depending on the type of rental.

If the declared property income exceeds the interest, there will be a total deduction of the interest paid.

Additional interest deduction

However, if the income is lower than the interest paid, there is an additional interest deduction, but under certain limiting conditions:

  • It only applies to the construction of your home, its acquisition in new condition, or its renovation (if the home is more than 15 years old). This reduction does not apply to buildings that do not constitute the borrower’s residence.
  • In addition, the loan must have a term of more than 10 years.

Reduction on the repayment or reconstruction of the capital

There is also a tax reduction on the amounts paid by the borrower to amortize or reconstruct the borrowed capital.

A certain complexity

Each case must be analyzed individually to calculate the tax advantage and thus better determine the amount you could borrow under a mortgage loan.

How do I deduct my mortgage from my taxes?

Did you know that you can deduct your mortgage loan from your taxes? Here’s how to do it in a few steps…

  1. New rules in effect since January 1, 2005

Since January 1, 2005, the legislator has introduced a new system for deducting your mortgage loan, known as the basket system. In the same box of your tax return, you will be able to deduct the amount of the borrowed capital, the paid interest, and all the premiums related to the mortgage loan (mainly life insurance).

  1. What does this deduction cover?

You can deduct the repaid capital, the interest, and the insurance premiums, but the total of these amounts is capped at a maximum annual amount of €2,120 per person who took out the mortgage loan. For the first ten years, this amount is increased by €710, for a total of €2,830 per person. If you have at least three children, you can add an amount of €70.

These increases are only valid for the first ten years and only if you are the owner of a single residence.

  1. Conditions for deducting your mortgage loan from your taxes:

– The loan must be for a single house intended to be the main residence of the family;

– The loan must be secured with a mortgage;

– The loan term must be at least 10 years;

– The loan must be taken out with a credit institution established in the EEA (European Economic Area).

  1. What happens to loans taken out before January 1, 2005?

They remain subject to the old legal system. However, you have the option to switch to the new system, but this choice is irrevocable.

Cybercrime and credit

Cybercrime and credit

For a change, today we will discuss the security aspect of banking operations on our blog. Currently, most financial transactions take place online. Indeed, you check your accounts online, print your bank statements via your connection to your bank’s website, make transfers directly via your computer, etc. It is no wonder that crime has evolved and turned to computer fraud. However, do not panic; with a little common sense and vigilance, you should be able to thwart any attempted scam.

Using your PC banking

When your credit contract is signed, the borrowed funds are transferred to your current account within 48 hours of signing. Your first monthly payment must be repaid within a month of signing the credit contract and so on, month by month, until the end of your credit contract.

What is phishing?

Phishing means “fishing” in English. It is a criminal maneuver whereby a cybercriminal tries to extract the codes you use with your security module (calculator) to make online payments. We invite you to watch this explanatory video.

In general, cybercriminals try to get you to disclose your electronic signatures either by phone or by email. They invoke various reasons: bank security verification, etc. A simple rule: never disclose your M1 or M2 codes as well as your four-digit debit or credit card code for any reason. If in doubt, end the conversation and call your bank branch yourself to verify. Always go to your bank branch in person to carry out this type of operation.

It is not uncommon for fraudsters to duplicate a website to make you believe that you are on your bank’s correct website. Therefore, do not rely on appearances. If in doubt, double-click on the small padlock at the top right of the page before the URL to check that it is indeed your bank’s URL. In any case, even via your bank’s website, no one can ask you for your electronic signature. If a suspicious screen appears, end your connection and notify your bank to check what it is about.

Some common-sense advice…

  • Always use the latest operating system and perform updates recommended by your system;
  • Ensure that your operating system is well protected by antivirus software. Also, do not forget to perform updates…
  • Beware of free download sites: they are an ideal entry point for viruses;
  • Periodically perform a full scan of your computer;
  • Read your bank’s IT security rules on its website;
  • Never give an electronic signature with your security module by phone or email;
  • After all, do not keep large amounts in your current or savings account: the interest rates are so low that they earn less than inflation. Prefer term accounts that will earn you more and have less easy access;
  • Remember to log out after using your Home Bank or PC Banking;
  • Be very cautious when using internet cafes. Invest in a small tablet if you need to travel and need to connect to your accounts regularly. You can now find Wi-Fi networks almost everywhere;
  • Be vigilant if an unexpected screen appears while using your PC Banking or Home Bank. Log out and check if the phenomenon occurs again. If so, notify your bank for verification.
  • Banks never ask for confidential information by email or phone. Be wary if you receive such a request. Log out and call your bank.
  • Spelling errors or convoluted grammatical constructions should also alert you.
  • One last thing, be careful with the information you share on social networks: your life will be of interest mainly to cybercriminals.

The consequences of the financial crisis on the credit market

The financial crisis erupted in Europe in the course of 2010. It took on alarming proportions in 2011 and now threatens to implode the European economic space. The origin of the financial crisis lies in the worrying evolution of public deficits and especially in the European governments’ desire to curb this alarming trend.

The first findings

Fourteen EU member states had a public debt exceeding 60% of GDP in 2010. These are Greece (124.9%), Italy (118.2%), Belgium (99%), Portugal (85.8%), France (83.6%), the United Kingdom (79%), Hungary (78.9%), Germany (78.8%), Ireland (77.3%), Malta (71.5%), Austria (70.2%), the Netherlands (66.3%), Spain (64.9%), and Cyprus (62.3%).

This observation has led to a first consequence: international rating agencies are starting to focus on the ability of member states to honor their sovereign obligations. Thus, France and Belgium have recently lost their famous triple A, and the long-term prospects are mostly negative for many member countries. This means that interest rates for member states could rise and increase the burden on states to finance themselves on the market and complicate the financing of the deficit between national revenues and expenses.

Who is responsible?

The responsibility of banks in this evolution is significant. Indeed, many renowned banking institutions (BNP Paribas, BelFius, Crédit Agricole, etc.) have bought sovereign debt from heavily indebted states. These institutions speculated on the high-interest rates offered by these countries while minimizing the risk of bankruptcy. However, it turns out that some countries may not be able to honor their obligations (like Greece) and drag their creditors, i.e., the lending banks, into their downfall.

The reactions of the member states’ governments have been threefold: refinancing banks on the brink of bankruptcy. This refinancing was coupled with a near-majority stake by states in the banks under their control (nationalization) and, of course, increased state control of banking activities. These necessary interventions unfortunately have harmful effects on the real economy, notably a redefinition of credit policies.

The impact on credit

As early as the first quarter of 2012, the negative effects on economic activity were evident: a reduction in mortgage loans in France by 47%, a decrease in European car sales by nearly 27%, and an increase in the number of bankruptcies in Belgium by 26%. In this area, it appears that some companies going bankrupt still have well-filled order books but can no longer access the credit market because banking institutions now apply strict and cautious policies.

In this situation, independent credit brokers, such as Crédit Populaire Européen, may well play a fundamental role in the continuity of the real economy. Indeed, Crédit Populaire Européen works with banks specialized in credit (Elantis, Krefima, Record, etc.). Some of these banks do not even offer traditional services (bank branches, savings accounts, current accounts). They are only specialized in granting credit and, since they do not receive savings, they do not speculate either. In other words, the financial crisis has not changed their approach to credit.

At Crédit Populaire Européen, we believe that credit brokers are now able to offer easier access to credit than ordinary traditional institutions.

The mortgage credit market: state of the situation for 2012

mortgage loan

We have been experiencing a significant financial crisis since 2008. What is its actual impact on the mortgage loan market? The year 2012 saw a contraction of the mortgage market by about 30%, but the causes of this slowdown are not always what one might imagine. Here is a quick overview of this important issue.

Mortgage loan results in 2012

While in 2010, some 275,899 mortgage loans were taken out, and even 325,454 in 2011, last year saw a significant decline in this market: according to data published at the end of January by the Professional Credit Union, 220,124 loans were taken out in 2012, a drop of over 30%.

This decline “is largely attributable to the abolition, since the end of 2011, of a series of incentives for the renovation market, such as the tax deduction for a large number of energy-saving investments, as well as the end of the green credit measure with interest subsidy,” explain credit professionals. “The uncertainties generated by the socio-economic context and the decline in consumer confidence are also not unrelated to this development.”

A breakdown confirms this analysis since the decline (between 2011 and 2012) reached 60% for “renovation loans” and 36% for “construction loans” while loans for purchases only decreased by about 10%.

At the end of 2012, this last category represented an average amount of 138,157 euros. In total, more than 21 billion euros were loaned by the various market players in 2012, bringing the total outstanding mortgage loans to about 180 billion euros at the end of December.

Fixed rate or variable rate?

Fixed rates also confirmed their comeback: variable-rate money rents attracted only two out of ten clients in 2012, and three in 2011. In 2009 and 2010, more than half of the mortgage loans were at variable rates. This return to greater security is mainly due to the reduction in the gap between fixed and variable rates over the past two years, making the former more attractive in terms of balancing risk and gain.

Typical client profile?

The primary player in the mortgage market is the “young” who have a capital of 50,000 euros “in hand” when they approach the bank to negotiate a mortgage loan. About 30% of these young people are under thirty years old and borrow an average of 154,570 euros to buy a home. The average monthly repayment amount was 751 euros in 2012 (714 euros in 2011).

Banks have understood this trend well and have recently developed products targeting seniors and self-employed individuals.

Trend?

Interest rates will remain low in 2013 and will confer the primacy of fixed rates. Moreover, banks are broadening the scope of their clients by trying to reach seniors and the self-employed.

The duration of loans tends to lengthen: 25 years is no longer an exception.

The mortgage loan is also becoming a product used by borrowers in difficulty or self-employed individuals who have no other guarantees to offer to access the credit market. Stay informed!