Do you know why bank interest rates can go up and down quickly and affect the interest on your Crediter loan?
Are you one of the users of Crediter products? If you are one of the users of Crediter products and complain about the interest on Crediter loans that always go up and down, then you need to know the cause by reading this article.
Relationship between Bank Interest Rates and Crediter Loan Interest
For those of you who are users of Unsecured Credit products, you must already know that the interest on Crediter loans depends on the tenor of the installments taken, the terms and conditions that apply. Before taking the credit, of course you have considered the interest given by the bank. But, do you know that the interest given has been established between Bank Indonesia and the bank you are aiming for?
Yes, banks which are under the auspices of Bank Indonesia may not set interest more than what has been made by the government. Banks may only set under the provisions that have been made by the government and that will change continuously every year. But the interest on the Crediter loan that has been previously set on the customer will not change again.
You will only experience an increase in Crediter loan interest in the next year you want to apply for another loan. Like one of Brian Mandi’s clients who told me about his experience using Crediter products to buy a car. In 2014, he applied for Crediter to buy a 7- seater car with a loan tenor of 3 years, at an interest of 6%.
After he paid off the abandoned family car, he needed a Crediter loan to buy his son a city car type car. So, prospective clients also re-submit Crediter with the same tenor in different years, namely 2017. This client was surprised to find out that the loan interest had changed from when he took the first Crediter.
Then, he questioned, what caused the interest on the Crediter loan to be different? Even though he still applied for Crediter at the same bank and with the same tenor. I also explained the reason why Crediter loan interest could go up and down quickly.
Causes of Bank Interest Rates Can Rise Down Quickly
So, the loan interest rate is a fee that must be paid when borrowing money from the bank. The interest on this loan is a compensation fee for funds that have been lent.
This interest rate itself can change every time, it can also be every month and can every quarter. There are several factors that influence Crediter interest rates. This is a must for you to know because creditors will not burden interest without any prior calculation. The aim to find out the factors that cause it is so that you have an idea of how much money you have to prepare to pay down the debt and interest.
# 1 Inflation
The first and sure factor has been very influential, namely inflation. This inflation is indicated by the increase in prices of goods in general and continuously caused by several things, namely from increased public consumption to the level of market liquidity.
With this inflation, it can affect the interest rates of bank loans. If inflation is higher, then the higher the interest rate of the bank loan. This can happen, because banks as lenders will ask for higher interest rates as compensation when there is a decline in the purchasing power of the currency in the future.
# 2 Economic Growth
When Bank Indonesia sees national economic growth that needs to be accelerated, Bank Indonesia must make the circulation of funds in the community faster. The move made Bank Indonesia take steps by lowering the benchmark interest rate.
If bank loan interest rates decline, then banking activities will increase because banks are easier to channel loans. With credit interest rates decreasing, people will find it easier to get credit, so that the velocity of money and economic growth will be faster.
With many people who apply for loans to banks, they will also open up employment opportunities, so that the economy wheels spin faster. Meanwhile, if the national economic movement is too fast accompanied by high inflation, Bank Indonesia will raise interest rates to reduce the velocity of money in the community.
# 3 Credit Offer and Request
In addition to providing credit to the community, the bank also offers other products such as savings and deposit services, where the bank has a role as a distributor of public savings funds.
If the demand for loans increases and the stock of public funds is limited, then the interest rate on bank loans will increase. This is done to limit the number of loans and rising interest rates can increase the interest of the community to save. Whereas, if the loan demand is reduced and the stock of public funds is abundant, then the bank’s interest rate will decrease.
This reduction aims to increase the interest of the community to borrow funds and reduce the amount of deposit funds. This will be inversely proportional to the supply side. If the level of credit offers decreases, there will be an increase in loan interest rates.
# 4 Deposits
As explained earlier, banks have several products that play a role in the causes of rising and falling interest rates. This deposit is one of the savings bank products that are stored for a long period of time. The more funds available on deposits, the loan interest rate will decrease.
However, if there are fewer funds in deposits, loan interest rates will tend to rise. This happens, because the circulation of funds in the bank is influenced by the amount of funds available that are in the deposit products owned by the bank.
# 5 Central Bank Policy
Banks in Indonesia are government-owned banks or what we commonly call state-owned banks and private banks. All loan interest rates from each bank are under the authority of the central bank.
The central bank in question is the agency responsible for monetary policy in the country because it must always maintain the stability of currency values, the overall financial system and the banking sector.
In Indonesia, the bank that is the central bank is Bank Indonesia. According to data at the end of June 2018, Bank Indonesia raised the benchmark interest rate by 0.5%, from 4.75% to 5.25%.
The increase in the benchmark interest rate aims to attract foreign investors to re-enter the Indonesian market, so as to reduce fluctuations in the rupiah exchange rate that have recently weakened. With the increase in the benchmark interest rate by Bank Indonesia, it is expected to affect lending rates in the second half of this year.
Know the flowers and make sure you learn them
You now know what factors cause bank interest rates to rise and fall quickly. You can now also learn when you should apply for credit. Make sure you always learn the type of credit, requirements, amount of interest, and of course the method of payment that suits your ability.
By learning it, you will definitely not feel debt as a burden in your life. After reading this article, I’m sure you already know what factors influence bank interest rates.