Savings Banks or what kind of entity suits me as a customer?

In our daily life, relations with financial institutions are indispensable. On many occasions we have to deal with banks or savings banks, from receiving our salaries to hire personal or mortgage loans. Arguably, the general banking is an industry that we have to be customers almost mandatory.

But from the standpoint of our interests as customers, what kind of entity is right for you, a bank or a box?
Fundamental differences between Banks and Savings Banks

We will try to briefly explain the fundamental differences between these types of financial institutions.

The main distinguishing feature is that the savings banks are in essence not for profit entities. They were born as entities to support work to the lower classes, and currently are required by law to contribute part of its profits to charitable work. Therefore, the boxes do not have owners, but managers, not publicly traded and therefore can not be acquired by private equity.

By contrast, banks are profit-making entities, and can use their profits to satisfy their shareholders and what they see fit.

The boxes have to spend at least 50% of its profits to reserves, to ensure their present and future solvency. The rest of the benefits you have to spend compulsorily Social Work, in fields as diverse as culture, sport, health, heritage conservation, etc.. Normally, the boxes earmarked between 30 and 40% of Social Work, which means they allocate between 70 and 60% to reserves.

Another difference resulting from the above is that the banks are run and managed by a board elected by the AGM, and the boxes are under the control of the Autonomous Community where its registered office setting, and the management bodies are elected and agreed by political representatives.

It is also true that small banks tend to be less present national banks, which can be a problem in finding offices when we travel. But large and medium boxes are already in almost all sites, after years of policies of expansion of its offices.
So what suits us better, a Bank or Savings?

On this question, we can say today will not get more benefits or better conditions in general for being a customer of a bank or savings bank.

Although initially it was true that the savings banks were specialized in household savings and small clients and small businesses today have been a change in their strategies and have become more savings banks.

In fact, mortgage or deposit volume, large Spanish savings bank La Caixa as Cajamadrid or are level with the big banks. And with the current financial market where institutions are struggling to win customers, banks and savings banks have similar strategic and financial plans, which translates into a great competition between them as to price their products (mortgages, deposits , pension plans, etc..) and also in an effort to improve efficiency, attention, speed etc..

We can say that today there is no difference between the prices of mortgages or other loans, fees charged or income from investment products we offer and savings banks.
In summary

We can say that the best entity for us as a client we find by comparing all the options available, regardless of whether it is a bank or savings bank, but rather other factors such as proximity of the offices, Internet service and telephone presence at the state level, and in particular prices of specific services we need or pay we offer for our savings, in addition to professional treatment that we all enjoyed (advice, speed, problem-solving ability, etc.). .

We appeal therefore to the advice I always stress: compare, compare and compare and then decide.

In recent years, the housing market in Spain has seen spectacular growth, both in terms of homes built from the data as selling new and used homes. This large increase was reflected in a large increase in the number of mortgage loans requested and granted. Credit institutions, and have seen their profit rates reflected significant growth.

But with the slowdown in sales due to economic uncertainty, the high housing prices and the oversupply of housing, there has also been a drop in the number of mortgage applications.

Banking institutions in order to achieve its objectives in terms of volume of loans, are forced to adopt new strategies to attract customers in a market where they are not as abundant. How? For taking away clients from competitors. If there are no new customers, because that will convince those who are already in the mortgage market for transferring their mortgage to our organization: it is what is called subrogation of mortgage.

This war between the entities to win customers, can be beneficial for consumers since the entities will offer more favorable terms for new mortgages which they had before. On the one hand, some banks offer commission-free mortgages (cancellation, subrogation, etc..), More favorable interest (from 0.20 to EURIBOR + EURIBOR + 0.35), including financial compensation that may be a percentage of total mortgage (1% – 2%) or a fixed amount (about 600 €). They also tend to offer the possibility of extending the repayment periods up to 35 or 40 years for monthly payments are lower.

Of course, that such generosity by the bank as payment on our affiliation must have their services counterparts. Nearly all organizations want to go on to become loyal customers and our products contracted relationship is not limited to the mortgage. Therefore, mortgage recruiting often will influence the simultaneous recruitment of life insurance and home associations, the domicile of our payroll, the clearance of a number of receipts, etc..
When I agree then take the step of changing my mortgage entity?

Clearly, as we always recommend, the main thing is to study carefully the multiple offers, come to many entities or information on the Internet. Then necessary to assess the options and decide upon several criteria:

1. first, to assess the total savings that we achieve over the life of the mortgage (provided that we maintain a period not greater than before).
2. also assess whether though not total cost savings, we can obtain longer periods for repayment at ease to go every month (if we have this problem, we should extend the repayment period, because it ends up paying considerably more).
3. weigh the cons, such as subrogation and cancellation fees, notarial costs of the new mortgage, or insurance already paid to the other entity that will be lost.

In summary

We can say that it is possible to save much money if we can find an attractive offer and we negotiate well, never forgetting that in this type of business entity exchange of mortgages, it is these that are very interested in having us as customers .

That force must know how to use it to obtain better conditions for our mortgage lending and reduce our expenses and future.

One option could be interesting negotiation would submit to the director of our agency a concrete offer and agreed with another entity better than we have now, for us to improve the conditions if you want to continue having us as customers.

If you have € 1000 on a credit card at 18% interest, the interest cost you 180 €. If you save € 1000 in a savings account with a 4% interest after taxes, you earn € 40 in interest. If you pay 1000 € to you with your savings you save 140 € per year.

It’s that simple, debts usually cost more than you earn on savings, so it is best to cancel debts to save.

When you save, you do really is to pay your money to the bank for use and lend it to other people. The difference between the fare you paid to you by letting the money to the bank (savings rate) and the rate it charges other people by loaning them money (the loan rate) is your profit. Therefore always costs more to borrow money to be earned saving.
Exceptions

This is based on the fact that the cost of debt is generally much higher than what you earn from savings, so that your finances get much better is you get rid of your debt if you start saving.

The exceptions are the few occasions when the debts are cheaper than the savings, or cost of pay is very high:

The exception to the penalty: If paying your debts is a penalty, as can happen with some mortgages or loans, then you better save and put your money in a savings account until the penalty is small enough not to import .

The plea of no interest or very low interest rates: This concept is entirely based on the fact that debts cost more than they earn on savings, but if you do not have interest in your debt, you must follow the opposite logic. If the interest rate on your debt is less than you make with your savings after tax, provided you’re disciplined, you better save and not paying your bills with that money.
Is it worth it to have money saved for emergencies?

For a person who has no debts or to pay for penalties, the most advisable would be to have money saved for emergencies, but for anyone with large debts, particularly credit cards, not worth it.

Example: If Laura has 5000 € saved, earning a 4% interest after taxes, for emergencies, and should also € 5,000 on credit cards. While your savings will rent 200 € per year, your debts will cost 900 €, so it actually pays € 700 per year. If you pay your debts with the money saved, or earn money from savings or pay interest, which would save € 700 per year.

This is advisable if you can get money in an emergency. Generally if you have credit cards you can get the money, but if you’re going to pay a personal loan and have no other means of raising money in an emergency, you have to consider.

We have seen in other items such as planning or reduce debt payments. But always talked big all suffer payments: mortgage, car, light, water, telephones … But one factor which few pay attention and can lead to a change in our financial situation: small expenses.

Every day we spend money on things not essential to maintain our standard of living. For example, we had coffee in the cafeteria, smoke, buy gum, constantly call for the mobile media buy, we buy bottled water, etc..

The expense of such small quantities can in principle be avoided: we can have coffee at home, quit smoking (and thus win in economics and health), no gum chewing compulsively (only occasionally to refresh the mouth, eg ), call on his cell phone only for important things (not silly), read the news in the digital editions of newspapers, or avoid taking the car up to go to the corner (you can walk or take public transport), we can drink tap water at home or have a filtering system (in the medium term is amortized by far) … All this will save you money.

The problem is that when individual costs so little, do not give them importance. We will see that ultimately, the expenditure is large and that can help pay off other debts more important.
Let’s make an example summary table of average daily expenditure
How Much Do you avoid? (Yes / No)
Coffee 3 € Yes
snuff 3 € Yes
newspaper 1 € Yes
Mobile 1.5 € Yes
gasoline 3 € Yes
water, 0.5 € Yes
another 2 € Yes
Total 14 € Yes

Here It seems that the sums begin to be more important. But we go a little further.
How much money we spend on monthly and annual disposable stuff?

Monthly cost: 14 x 30 = 420 €
Annual: 14 x 365 = 5,110 €

It shows that money spent can be a lot. Even for someone who only drink coffee away from home once a day (1 €) saving of 365 € per year and would have to be taken into account. That is, for example, a letter from one of our loans.

But we go a little further.
Savings we can get by stop spending money on superfluous things

These savings can be redirected to other payments, investments, generating greater savings. For example, if we decide to invest the € 5110 to recoup part of our mortgage, we get a reduction in the time and therefore a lower burden of very substantial interests.

For example, a 20-year mortgage of € 100,000 at 5% interest, at odds of 660 € a month, reduce your time in nearly two years, which means a big saving in interest and tax profit also increased by the increase deductions for house purchases (due to the payment of those extra € 5110).
What if we saved the capital invested by stop spending money on unnecessary things?

If the annual spending on little things we looked much expendable, let’s see what happens if we compare the value of that money in the future.
Term Investment Total Return at the end of term
5110 € 5 years 5% € 6521.80
5110 € 10 years 5% € 8323.65
5110 € 15 years 5% € 10,623.32
5110 € 20 years 5% € 13,558.35
5110 € 40 years 5% € 35,974.34

Recall that Co = C1 / (1 + i) ^ n where:

1. Co = capital value today (what we want to calculate)
2. C1 = value of capital in the future (2143.8 €)
3. R = nominal interest rate (5% = 0.05)
4. n = time (in years 6 months = 0.5 years)

Co = 2143 / (1 + 0.05) ^ 0.5 = 2092 €

Here is what they seem perfectly that small quantities are unimportant, in fact, very large quantities when accumulated over the years.

In the case of investment to 40 years, we can say that if this is a big part of life we have, save those nearly € 36,000 to spend on just leaving things disposable.

* Calculate the total amount of your debt: The first thing you should do to get rid of your debt is to admit that you are in debt, and be willing to get rid of them. Carefully calculated the total amount of money you owe. Get rid of debt first with higher interest rates, this will help you save big money. ” It is very difficult to solve your problems if you’re not clear about your financial situation.
* Calculate your cat and prevents add a single euro to the amount you owe: It’s time you stop wasting money so you have to change your habits when it comes to spending. Watch carefully how much you earn and your basic expenses and try to reduce costs as much as possible. All this means a change in your lifestyle. Avoid by all means not even one euro add to your already overwhelming debt, for example, use a debit card instead of a credit card so that you can use the card only if you have money on your account.
* Squeeze any extra money and accelerate your debt payments: Cut your lifestyle and use any extra money you get to clear your debts faster. Deletes a growing debt, get rid of the one with the highest interest rates first, thus saving much money.
* Choose the most appropriate method to settle your debts: There are several options to solve your debt, but select the most appropriate choice is as important as a wrong step can ruin your future. The choice of method to solve your debts must depend, ideally, the type and amount of debt you have.
* Choose the right company: Companies with debt consolidation are springing up like mushrooms in Spain, so it is very important that you seek help to solve your debts in a proper company.
* Eliminate your credit cards: once you’ve finished paying the debts of a credit card account canceled immediately. Leave credit cards at home to avoid the temptation to use them. Never pay the debts of a credit card with another, as it has some disadvantages. Each credit card is a source of potential liabilities. Keep in mind that introductory offers can be very tempting but not so good after a certain period of time.
* Be careful with your mortgage interest: Interest on mortgage loans are much lower compared to the interest charged by credit card debts. In addition, mortgage interest is deductible, so many people use money from their mortgages, however, if the money were used to pay credit card debt, debt re-shoot.
* Hire professional help: For some spending money is a psychological problem, it can be a habit or an addiction like alcohol, gambling or drugs. Social problems like divorce and job loss or unavoidable emergencies like disease can also be a cause in such cases it is advisable to seek professional financial advice.

If you follow the suggestions above will get consistently successful economic performance in the future. Look at your present situation as a learning experience and that will free you from your debts soon.