Non-performing loans

Non-performing loans: for some years this term has been widely used by the media to describe the crisis in the Italian banking system.

Have you ever wondered what are the main reasons that brought Italian banks to their knees? Many respond with the usual reasons: the restrictive directives of the Good Finance Bank, the recession, the 3% constraint envisaged by the stability pact.

The banking system was forced to reduce investments in the Italian economy due to several factors: impaired loans are probably the main reason.

What is impaired credit?

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According to the new criteria suggested by the Bank of Italy, the credit is defined as “impaired” when the debtor does not make the payment within the 90-day period; this term starts from the expiry date of the transaction. To understand each other better:

if Mr. Cole must return the sum of 10 USD to the Bank by 01.01.2018, the credit will be considered impaired when Mr. Cole will not have paid 10 USD to the Bank, and when 90 days have passed since 01.01.2018 (on this page we have described in detail the process of credit deterioration).

The impaired credit is also defined as “NPL” creditor “NPE” credit; the acronym NPL indicates the initials of the words “NON PERFORMING LOAN” (“non-performing loan”), while the acronym “NPE” indicates the initials of the words “NON PERFORMING EXPOSURE” (“non-performing exposure”).

Why do NPLs put Italian banks in crisis?

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Here are the 4 main reasons:

DETERIORATED RECEIVABLES ARE A FAILURE TO EARN 

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Impaired loans constitute a loss of earnings for the Bank. The main engine of banking is the provision of banking services (for example, loan agreements); however, failure to pay the banking service within the due date generates a capital loss and therefore a bad debt.

The loss of earnings generated by a bank loan reduces the flow of money collected by the bank; in this way the funds with which the Bank can finance businesses and households in the real economy decrease. According to the latest GFB statistics, in 2017 bank bad debts in Italy decreased compared to previous years;

Italian banks reorganized themselves by reducing the number of outstanding loans. However, we are still far from solving the problem; in 2017 Italy was even earlier in the special ranking of European countries with the highest number of impaired loans. The Italian banking system produced NPL credits for 276 billion USD; France follows with a total of USD 148.4 billion NPL, while Spain ranks third with 141.2 billion USD.

DETERIORATED RECEIVABLES OBLIGE BANKS TO WITHDRAW RESERVES

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According to the law, a bank that owns impaired loans is obliged to withhold sums which are defined as “reserves”; these sums cannot be used for any banking operation and will be used to cover losses on impaired loans.

In 2018, the GFB asked all European banks to increase NPL credit provisions by setting stricter parameters than in previous years.

According to the latest indications coming from the media, credit institutions will have to cover the entire “potential” loss for impaired loans that are not backed by guarantees (and therefore have no alternative recovery instruments) within the two-year period.

For all secured loans (i.e. secured by personal guarantees) the obligation to cover the entire potential loss must be made within the 7-year period.

DETERIORATED RECEIVABLES ARE DIFFICULTLY SOLD

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Although Italy has been defined as the “NPL supermarket”, banks often encounter difficulties in the assignment of impaired loans.

Investments in this sector are growing and many foreign funds have purchased bad loans from the main Italian banks. However, the purchase request is still too low compared to the banks’ expectations, since the transfer system is too opaque and with few known rules.

It is not easy for the average investor to find the right information to evaluate the solidity of the transferor Bank and to correctly evaluate the receivables sold.

To overcome this problem, the GFB has proposed the introduction of a digital platform that can make the transfer of NPL credits more transparent and which facilitates the exchange of information between the various investors.

A system that can facilitate the activity of investors (eager to acquire more information on the asset to invest in) and that can allow the Banks to sell impaired loans more easily.

IN ITALY THERE ARE HIGH RECOVERY COSTS AND LONG RECOVERY TIMES

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Non-performing loans can be converted into cash through out-of-court or judicial debt collection activities. However, according to the latest indications provided by the GFB in Italy, the legal costs of debt collection are the highest in Europe.

The reason for this difference is not due to the fees that the Banks must pay to the law firms in charge of the recovery activity (the fees of the Italian lawyers are among the lowest in Europe); but rather to the taxes and “living” expenses that a creditor must pay to the State to recover the credit in court.

Furthermore, the excessive duration of the Italian executive processes (in particular real estate executions) prevents the Banks from recovering bad debts quickly.

Mortgage loan: pros and cons

 

The mortgage loan is the undisputed ruler of real estate executions.

If you want to recover a loan, but there is a landlord before you, you need to know that your chances of success decrease.

Within the real estate attachment, the landlord has the winning card; you will find yourself facing an opponent who has an “ace takes everything” in his hand and who will most likely win the game. In this article I will explain what is the mortgage loan and what are its privileges that endanger the recovery of your credit.

What is the mortgage loan?

What is the mortgage loan?

The mortgage loan is a contract entered into between a natural person (or legal person) and a bank; thanks to this contract the bank grants the customer the financing of a large sum of money for the purchase of a real estate (usually the purchase of the 1st house). The main feature of the mortgage loan is that the bank agrees to finance the customer only on condition that the purchaser of the property grants the same bank to register a 1st degree mortgage on the property.

What are the main features of the mortgage loan?

What are the main features of the mortgage loan?

  • It is granted only if the bank enters a 1st degree mortgage on the client’s property;
  • It has a duration of over 18 months (minimum of 1 year up to a maximum of 30);
  • The sum loaned to the client cannot exceed 80% of the property value (“loan-to-value”). Those who need higher amounts can opt for the mortgage loan;
  • The sum is lent to the customer only for the purchase of the first house;
  • Cheaper interest rates are applied than normal loans;
  • There are lower notary costs than other contracts.

Why does the law recognize these benefits to the customer who gets the loan?

Why does the law recognize these benefits to the customer who gets the loan?

The law recognizes a public interest in the protection of the mortgage loan, since thanks to this type of contract it is possible to spread real estate property (real estate property is protected by art. 47 of the Constitution).

If you know the strengths of other creditors in advance, you can avoid bad surprises when you try to recover your credit; in fact, it often happens that you have to “compete” against a bank (and against a mortgage loan) during real estate executions.

How to use Social Institute loan simulator for public and postal employees

Online simulation of Government Agency loans

Online simulation of Government Agency loans

Public employees and retirees who need funding can get online quotes for subsidized Social Institute ex Government Agency loans. Credit lines for which it is possible to calculate the installment using the Social Institute simulator.

Service that has been made available to users by Social Institute since the beginning of 2016. It is a web application that allows you to calculate the installment of the loan and to know the items of expenditure applied to the loan.

The Social Institute ex Government Agency loan simulation service allows you to know in detail all the conditions of the credit lines dedicated to public employees and pensioners. The online calculator on the official Social Institute website allows you to know all the conditions applied to Social Institute Government Agency loans.

In this way, members of the public sector can have the opportunity to evaluate the convenience of ex Government Agency loans. It is also possible to know the maximum and minimum amount payable, depending on the type of loan you wish to apply for.

In this regard, we would like to remind you that public employees and pensioners can obtain loans on favorable terms granted directly by Social Institute. Lines of credit granted through a specific credit fund, the unitary management of credit and social benefits.

These are loans to which only those who are members of the aforementioned Fund have access. The former Government Agency loans are divided into two categories: small loans and multi-year loans. The former are personal loans with relatively low amounts, while multi-year loans are designed to meet significant expenses.

Before talking about the procedure to follow to use the Social Institute simulator it is necessary to remember that this can only be used for the calculation of the installment of direct loans. It is therefore not possible to carry out simulations of Social Institute guaranteed loans.

How to make the loan installment calculation

How to make the loan installment calculation

But how to use the Social Institute simulator? Those who wish to carry out an Social Institute loan simulation must connect to the official Social Institute portal. Once you reach the home page you need to click on the link All services, located at the top left.

From the list of services it will be necessary to filter the results by theme, choosing the Loans item. At this point it will be sufficient to select, among the results proposed, the Public Employee Management service : simulation of the calculation of small loans and long-term loans.

The service is accessible to all users and does not require authentication with Pin Social Institute code. Not only. Once you reach the simulator you can choose between three calculation modes.

In fact, it is possible to carry out both a general loan simulation and a more specific calculation. In the second case it is possible to choose between Simulation loan for ideal installment and Simulation loan for specific amount.

Once the few required data have been entered, the Social Institute simulator lets you know all the Social Institute ex Government Agency loans accessible to the user. For each proposed loan, the system indicates the conditions and all items of expenditure. In addition to the interest rate and the installment amount, all the expenses applied to the loan are indicated.

How to carry out the Government Agency Ipost loan simulation

How to carry out the Government Agency Ipost loan simulation

When addressing the Social Institute loan simulator issue, it is also necessary to refer to the calculation relating to ex Ipost loans. Again it is a calculator designed to facilitate postal employees.

Unlike what happens with the Social Institute loan simulation service, those who wish to calculate the loans for postal employees must go to the information page of the portal which deals with the direct multi-year loan for postal office fund management.

At this point, simply use the link on the page to access the Social Institute ex Ipost simulator. Once the application for calculating the loan has been reached, simply select the type of loan you want to calculate, between a small loan and a multi-year loan ex Ipost.

It will therefore be necessary to enter the amount of the fixed remuneration received by the applicant. In this way it will be possible to know all the conditions applied to the financing, from the sum that can be financed to the amount of the installment and the interest.

Do you need to sign student loans?

Make sure you have complete information before agreeing, Using student loans to cover college education costs may be a smart financial move, but it should not be taken lightly.

Debt repayment

Debt repayment

The decisions you make now about the amount of money you will borrow based on future projections of your debt repayment ability can have long-term financial implications for you and other family members.

Having exhausted all other forms of financial aid and scholarships, however, taking out a loan can be your last resort.

First, you need to understand that there are two types of student loans – federal and private. Study abroad loans do not usually require a co-signer, but they do have some very strict collection practices if you should default on these loans upon graduation.

The federal government could mitigate future earnings or even withhold the federal tax refund that you would otherwise be entitled to. Private student loans, on the other hand, typically do not have enough breadth to collect, so they are more likely to seek co-signer loans.

This is someone who has a better credit rating than a student and who agrees to be responsible for repayment if the student does not repay the loan. It is often the parent, grandfather, relative or close friend who agrees to take this risk.

What to consider before co-signing

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If you are asked to be a signer you want to think carefully before agreeing to do so.

You certainly want a student to be able to attend college, but there is no guarantee of what is happening down the road. While many promises are certainly made about responsibility, things can change very quickly after graduation.

A student may be over-indebted and have more credit than they can easily repay, the job market may not be as promising as it used to be, or the student may not be able to find a high-paying job quickly.

A student may be over-indebted and have more credit than they can easily repay

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Whatever the reason, he or she declines payments and you suddenly start receiving collection notifications in your mailbox. Here are some things to consider before agreeing to sign the dotted line to pay for college:

  • You could be responsible for the whole loan: Of course, we all focus on positives and best intentions, but so many things can happen. Even if your student is responsible and gets a good job, he or she might get sick, have marital problems, be in some kind of accident, or even die. None of this will relieve you of your obligation to repay a private student loan. Talk to the student and your spouse to make sure you can afford to make these payments if the worst happens.
  • This could affect your credit rating: You may need to borrow money for your own use in the coming years, and being a co-signer can make it difficult for you to withdraw your home or car loan at reasonable rates. When student loans start arriving, any late or missed student loan payments may also reflect on your credit. Make sure the student has a solid understanding of the total amount of money that is being borrowed, how much to repay after the interest is calculated, what the total monthly payment will be, and when payments will begin.
  • It would be difficult to get out of your obligation: Even if you think you have the flexibility to repay the loan if necessary, something unexpected can happen in your life. You may think that you are protected because the loan agreement has a release clause but read it carefully. It may not be possible to release until a student has made a certain number of payments. Credits are often sold on third-party collection sources that may not agree to the posting clause and may start coming after you for payment.

Advise your student to first rely on available federal, state, and institutional financial assistance before asking you to sign any private student loan.

Guide to web applications multiannual loans : what to do

 

The 2019 Multiannual Loans web applications are the main channel for requesting ex Government Agency loans. How is the forwarding carried out, what must those who want to receive the loan do? Here we list all the operations to be performed.

How the request is made for long-term loans pursuant to Government Agency 2019

How the request is made for long-term loans pursuant to Government Agency 2019

The request for a multi-year loan is undoubtedly one of the most delicate steps for the user interested in financing. How is the consignment produced? Web applications Long-term loans are the main solution.

For their use, the user must use the Social Institute website. Inside, the page called “Multi-year loan directed to members Unitary management of credit and social benefits” will be sought. It is a resource that allows you to view more information regarding financing.

By taking advantage of the ” Access the service ” link, the user can initiate the procedure involving the online request for the credit line.

This requires possession of the Social Institute PIN and the tax code. If you do not have the PIN, you need to apply to the Institute. Staying within the scope of the request, we must underline other provisions of the social security institution.

Public employees in operation will have to provide the request to the reference administration, while pensioners, in addition to multi-year loan web applications, can also rely on the Contact center, which answers the 803 164 number from the fixed network, and the patronage.

All information on online calculation Multi-year loans

All information on online calculation Multi-year loans

The Social Institute website is also an important tool for calculating the repayment of former direct Government Agency loans. Calculation that is produced using another online service, the one called “Public Employee Management: simulation of calculation of small loans and multi-year loans “.

The user will have to enter the data that will be used for the processing of the repayment plan.

Differences between small Social Institute loan and direct multi-year loan

The direct multi-year loan is a product ex Government Agency and therefore is now administered by the National Social Security Institute. The regulation that defines its characteristics provides that the repayment project is structured over two time intervals: five or ten years.

The direct multiannual uses the methods of repayment of the credit typical of the assignment of the fifth. The installment is processed in the light of a fixed interest rate of 3.50%. The funding provides for specific restrictions on access. In fact, only civil servants and pensioners registered in the unitary management of credit and social benefits can achieve it.

The same ones that can apply for the Small loan, which however differs from the Multi-year from various points of view. The most obvious aspect is perhaps the interest rate: 4.25%. But the duration, from 12 to 48 months, and the use also change: the use of the loan is not associated with specific limitations.

Do you take a 401 (k) loan?

Many retirement plans, such as 401 (k) and 403 (b), allow participants to borrow money from their retirement savings. While this is your money, there are many things to consider before embarking on that retirement plan.

It’s a loan, a lot of free money

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One of the most common mistakes people make is that borrowing from their 401k is the same as going to a bank and taking money from a savings account.

That couldn’t be further from the truth. When you borrow money from your 401 (k), you take out a loan. Like a car loan or a home loan, this means that you promise to pay what you borrow.

When you start a loan from your retirement plan, you will need to establish a repayment plan, which for most loans ranges from one to five years.

The loan repayment will begin shortly and will automatically be deducted from your paycheck. As if you were to take any other type of loan, it will now be a regular expense to pay.

Interest and fees

Interest and fees

Another thing to consider before lending against your retirement fund is regarding the various fees and interest rates you will be charged. Most plans charge a one-time loan fee that can be more than USD 75, regardless of the size of the loan. This means that even if you were to borrow USD 1000, and they were charging a USD 75 fee, you would lose 7.5% from the top.

In addition to fees, you also have to pay interest as you would for any other loan. One good thing about interest is that you actually pay with interest. So you are actually putting a little more money into your account instead of the bank that received the interest. The common interest rate is the current base rate plus 1%.

Double Taxation

If you remember, your pension plan contributions are tax-based. This means that you get a tax deduction when contributing to the plan, and then you will be taxed in the future when you take the money out of the plan. Unfortunately, when you take out a loan from your plan, you may be subject to additional taxes.

And while regular 401 (k) contributions are deducted from pre-tax payroll, the loan repayment is not. This means that you take pre-tax money from your account and then return it for a fee. This can cause some of this money to be taxed twice.

Reducing the power of mixing

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Compound interest is one of the biggest assets you need in a retirement plan. Over time, the interest and profit of money in your snowball account and it can accumulate significantly.

When you withdraw money from your retirement account, you reduce the amount of money that can be reduced. As you slowly repay the loan with little additional interest, this controversial repayment plan can adversely affect the rate at which your money can grow if it stays within your 401 (k) as a whole.

The consequences of leaving the employer

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As mentioned at the outset, this is a loan and has to be repaid.

If you leave the employer sponsoring the plan, you are still on the hook for the loan. In some cases, you may request a coupon book and continue to make payments, but if you fail to continue making payments or are unable to repay the loan in full, you will not make the loan.

When you have borrowed a 401 (k) loan and have not reached the age of 59, the IRS treats the loan as a distribution that would not only be subject to income tax, but also an additional 10% early withdrawal penalty. This can quickly get into your retirement savings.

Final thoughts

Understandably, life happens, and there are times when you really need the extra money. Ideally, you will want to have an emergency fund set aside to cover those situations, but for many, turning to a retirement plan can be one of the few options.

Before moving on to a 401 (k) loan, make sure you first consider all the other options and have a full understanding of what it will cost to borrow from your retirement plan.

Is there a tax deduction for a student loan interest?

If you have a student loan, you may be wondering if you qualify for a tax break. You can reduce your interest by up to USD 2500.00 a year.

However, if you are poor and earn more than USD 65,000 a year, that amount will be phased out at the system level so that you may not qualify for the full USD 2500.00. This is above the line deduction, which means you do not need to put it in order to take full advantage of this tax deduction.

This is great because many recent college graduates will not be starting their first few years of work.

How do I get a deduction?

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You will need to file a Form 1040 with Attachments A to claim this deduction. Your student loan company will send you a Form 1098-E at the end of the year or January, with the amount of interest you can claim for your taxes that year. Be sure to wait for the form before filing your taxes.

It is also important that your address is updated with your credit company so that you can obtain information. If you have student loans from multiple companies, be sure to wait for each company to submit 1098-E before filing their taxes. This can help you avoid what is necessary to change your tax return and increase the amount you receive in taxes.

Should student loan payments be avoided for tax relief?

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Many people view the tax break as a reason not to worry about paying off their student loans right away.

Only interest is tax-deductible, so don’t make money you won’t pay. It’s important to do something about student loans today. You can watch him either pay money in interest or money in taxes. If you paid off a student loan, you have that extra money every month and just pay a little more in tax every month.

This will give extra money to your budget every month.

If your student interest rate is low and you have other debt, you may consider putting a student loan at the end of your payment plan. This will allow you to use the tax deduction as long as you still have debt, but you should not keep the credit to take a tax deduction. It is important to work to eliminate your debt as soon as possible.

This will make it easier to achieve other financial goals and do the things you want, such as buying a home. When you buy a home, you can deduct the interest you pay on your mortgage and the fees are higher than the student loan interest.

Remember to save on your mortgage interest

However, once you have a mortgage the same logic can be applied to a tax deduction on interest on the mortgage. You should focus on the payment you are saving to save a small percentage of your taxes.

In the end, you will not keep the money you are either paying to the bank or the government. Releasing student loans or mortgages for tax relief just doesn’t make logical sense. It makes more sense to get out of debt and work to build your wealth.

Take advantage of all possible tax credits and deductions

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In addition to the deductions you may qualify for, you should look at any tax credits you qualify for. Tax credits can be refunded to you if you have extra money after covering your tax bill.

When filing your taxes, you should use tax software that is designed to help you find any deductions and credits you qualify for or go to a tax accountant who can help you find ways to save on your taxes.

If you are self-employed or starting your own business, you may want to use accountants to properly correct your first or second year in business.

How Ten-Year Government Agency Loans Work For Employees and Retirees

Guide to 10-year Government Agency 2018 loans

Guide to 10-year Government Agency 2018 loans

Thanks to their social security and employment position, retirees and civil servants have access to subsidized Social Institute ex Government Agency loans. Credit lines that guarantee the possibility of accessing credit at an interest rate. Among these are the 10-year Government Agency loans.

Ex Government Agency loans are divided into two product categories, small loans and multi-year loans. The former are short-term products that allow relatively low sums to be obtained, while multi-year financing is designed to face significant expenses.

Specifically, multi-year loans can last 5 or 10 years. When we talk about ten-year loans, we therefore refer to the multi-year Social Institute ex Government Agency loans with a ten-year duration. Loans that are meant to meet important expenses.

Purpose Government Agency 10-year loans for employees and retirees

Purpose Government Agency 10-year loans for employees and retirees

We remind you that the amount and duration of multi-year loans vary according to the purpose. Purpose that must be included among those provided by the Government Agency Loan Regulations.

In fact, in order to access credit, it is necessary that those who apply for ten-year Government Agency loans have to face expenses falling within those envisaged by the Regulation. For lesser expenses, a 5-year reimbursement is provided, while for higher expenses, 10-year reimbursements are eligible.

As a result, ten-year loans are designed to deal with particularly important expenses. Below are the purposes for which it is possible to apply for Government Agency financing for a ten-year period.

  • Purchase of the first house.
  • Redemption of public housing or public housing already rented.
  • Construction of the first house.
  • Acquisition of a house in a cooperative or by a cooperative consisting of tenants of houses of public bodies and being disposed of.
  • Restoration and conservative restoration interventions, extraordinary maintenance and building renovation of the house.
  • Reduction or early repayment of a mortgage loan signed, in any capacity, with credit institutions by the applicant or spouse.
  • Serious illness of family members of the applicant.

In addition to the aforementioned purposes, it is also possible to obtain ten-year Government Agency loans to meet exceptional and socially significant expenses that require a significant economic commitment.

Amount and refund

Amount and refund

The eligible amount is defined on the basis of the applicant’s income and the purpose of the loan. What has been said taking into account the limits set by the Social Institute Loan Regulation, which provides for limits on the amount for some of the purposes envisaged.

The repayment takes place in 10 years and involves monthly installments. The interest rate is fixed at 3.5%. A rate of 0.5% for administration costs applies to the gross amount of the loan. The beneficiary must also face the payment of a premium for the Social Institute Guarantee Fund. Premium that is defined on the basis of the age of the applicant and the duration of the amortization plan.