Financial Services
Legal validation: 12/4/2011
Quiz
Keeping on track with your budget
Into: Managing a family budget 
Can you manage your budget? Keeping on track with your budget
The following pages are not aimed at giving you a lecture on household finance, but at offering you a few tips on the best way to plan and spread out your expenditure so that you can clearly set out your monthly budget and avoid the "end of the month" stress... The following topics will be discussed: 1. Test your budgeting habits; 2. A budget: what’s the point? 3. Key components of a budget 4. Is there anything you still don’t know about budgeting? 5. A few tips to organise your (...) Read more
Defining your financial capability
Into: Managing a family budget Can you manage your budget? Calculate your financial capability
Definition of financial capability: How to do it To identify your financial capability (or your ability to meet payments) means that you need to work out a budget - a balance between your spending and earnings. You must first look at the amount of money you earn or receive each month. If the amount you receive each month is lower than the amount you spend you have a financial problem. If this is the case you should not contemplate using credit or taking out a loan. In this situation, you (...) Read more
The risk of over-borrowing
Into: Managing a family budget Financing your projects Using credit
The risks of over-borrowing: over-indebtedness The constant use of credit to buy goods or services can lead to a situation of over-indebtedness, that is you can no longer meet repayments and build up arrears. Therefore, if you are falling behind with your payments, or your bank overdraft is not clearing and your creditors are threatening you with court action, don’t let the situation spiral out of control. Don’t ignore the problem, it will only get worse. Instead try and reach an (...) Read more
How to choose your investment
Into: Managing a family budget Financing your projects Using your savings
Each investment has a set of pros and cons. Your choice for a given type of investment will depend a great deal on your personal aims and needs. Below are the 6 criteria which you should take into account before choosing an investment: 1) the life of the investment: you need to know how long the money needs to stay locked in the scheme to yield the best returns, 2) dividends: you need to find out about the kind or returns you can expect from your investment (interests, dividends, (...) Read more
Some legal background
Into: Consumer credit Getting a loan or credit Where can you get it?
Some legal background The Consumer Credit Act Regulations, 2010 (Legal Notice 330 of 2010) issued under the Consumer Affairs Act (Chapter 378 of the Laws of Malta) implements the provisions of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC. The Directive aims to improve transparency on consumer credit products and allows easier comparison across the EU. It is believed that (...) Read more
How do banks decide whether or not to give credit?
Into: Consumer credit Getting a loan or credit How to get credit?
How do banks decide whether or not to give credit? To be eligible for credit, you will need to provide some documentation. Usually, this will require a fully completed application form, a signed data protection form, together with your latest pay slip and FS3 and your identity card. Banks use a number of methods to decide whether or not to give credit. They take into consideration your occupation and salary, your marital status, your financial commitments and your total assets - if the (...) Read more
Annual Percentage Rate of Charge
Into: Consumer credit The cost of consumer credit How to calculate it?
Annual Percentage Rate of Charge The Annual Percentage Rate of Charge, or APR, is calculated on the terms of the credit agreement; interest rate, annual fees. This rate of charge takes into account the interest rates applied, fixed or variable and any additional costs and is used to compare rival competitor offers on a like for like basis. For example: Loan A is granted with 6.5% interest rate whilst a loan B is agreed at a lower rate of 6 %. At first, loan A appears to be more expensive (...) Read more
Choosing the right credit
Into: Consumer credit The cost of consumer credit How to compare between offers?
Taking aside the purely financial elements of credit, there are other considerations you should bear in mind: > How often will you get statements? > What are the opening hours (weekend hours for example), > How quickly are applications processed and with what ease? > Are there any additional services or additional benefits linked with the credit (for example waiving of legal fees or free one year insurance policy when you use the credit facilities offered by the seller...). Always (...) Read more
Golden rules to follow before entering a contract agreement
Into: Consumer credit Consumer protection in the consumer credit sector What you need to know
Your bank, credit organisation or seller has made you a credit offer. The offer appears to conform to the law. However, you need to check some final details before you commit and sign to the offer; in some cases, once the offer is signed there is no going back... Golden rules to follow before entering a contract agreement Before you commit to anything, you need to contact at least two banks and compare the different rates and deals on offer. You don’t have to sign the offer the day it has (...) Read more
Special cases in loans and credit agreements
Into: Consumer credit Consumer credit repayment Standard loan and credit agreement
Early repayments The Consumer Credit Regulations make provision for cases of early repayments. Article 16 of the Regulations provides that a consumer shall have the right to discharge his obligations under a consumer credit agreement in full or in part before the agreed termination. Thus the Regulations envisage a scenario where you happen to receive an unforeseen amount of money and you wish to pay your credit in full before the agreed date. If the consumer pays the creditor before (...) Read more
Negotiating with your creditors
Into: Consumer credit Consumer credit repayment I have repayment problems; what can I do?
Negotiating with your creditors Before commencing any sort of negotiation with your creditors, work out a financial statement detailing your total household income and expenses. Also prioritise amongst your expenses. For example of you fail to pay your first two electricity bills, you could incur severe penalties including an interruption of the service. Obviously a reinstallation of the service would cost you additional charges. So remember to prioritise when working out your financial (...) Read more
Pledge
Into: Consumer credit Guarantee agreements What is a guarantor?
Basic principles of a pledge agreement (’Il-Kuntratt ta’ Rahan’) What is ’pledge’? ’Pledge’ is a contract created as a security for an obligation - ’kuntratt li jsir biex wiehed jaghmel tajjeb ghal obligazzjoni’. The pledge may be given by the debtor himself (’id-debitur’) or by a third party for the debtor (’minn terza persuna ghad-debitur’). What may be given as pledge? The things that may be given as pledge are movable things (’affarijiet mobbli’) and debts (’krediti’) and other rights relating (...) Read more
Contacting an EU Credit Institution
Into: Consumer credit Taking out credit in another EU country
How and why you may want to contact an EU credit organisation You may contact a foreign lender either by replying to an advertised offer or through the Internet, where you can easily compare the offers between countries. In fact, an online search will allow you to get information on the rates applied, a loan simulation, options available and examples of repayment schemes... E-credit, or credit arranged on the Internet, offers two main advantages namely speed and anonymity. Still, its (...) Read more
Define your financial capability
Into: Mortgages Mortgage offers What do I need to know before signing up for a mortgage?
To identify your financial capability (or your ability to meet payments), you need to work out a budget - a balance between your spending and earnings. You must first look at the amount of money you earn or receive in other ways each month. If the amount you receive each month is lower than the amount you spend you have a financial problem. If this is the case you should not contemplate using credit or taking out a loan. In this situation you need to reduce your monthly commitments. If your (...) Read more
What is in the KFI?
Into: Mortgages Mortgage offers What is in the KFI?
The Annual Percentage Rate of Charge (APR) The Annual Percentage Rate of charge, or APR, is calculated on the terms of the credit agreement: e.g. interest rate and annual fees. The APR takes into account the interest rates applied, fixed or variable, and any additional costs payable to the lender. The borrower can use the APR figure to compare rival credit offers on a like for like basis. Example: Loan A is granted with 6.5% interest rate whilst a loan B is agreed at a lower rate of 6 %. (...) Read more
Make good use of competition
Into: Mortgages Guarantee on mortgages Which type of cover do I need?
To make the right choice, make good use of the competition! Usually, the insurance premium is paid annually rather than monthly but all depends on the circumstances of the case and on the type of policy which you will eventually choose. As such, it makes perfect sense to avoid any unnecessary spending, and you need to make good use of the competition between insurance companies for both types of (...) Read more
Which type of guarantee is required from me?
Into: Mortgages Guarantee on mortgages Which type of guarantee is required from me?
Documentation Required For a loan application, the bank will usually need the following standard documentation: 1. Last three payslips together with a copy of the contract of employment; 2. Income Tax Return and FS3 3. Copies of Identity Cards of the borrowers; 4. A character reference - if the customer is not already a client of the bank. In the case of a home loan application, the bank will require the additional documentation, apart from the list of documents referred to above: (...) Read more
Insurance on mortgages - what type of cover do I need?
Into: Mortgages Guarantee on mortgages What type of cover do I need?
Different types of cover Critical Illness Cover Most critical illness policies will cover the most common serious illnesses: Heart Attack, Cancer, Stroke, Kidney Failure, Major Organ Transplant, Coronary Artery By-Pass and Permanent Total Disability. Permanent Total Disability may also be included as an additional benefit seperate from the critical illness cover. However, critical illness cover may not be available to everyone, due to occupation, health or family history. Always check (...) Read more
Insurance on mortgages - what type of cover do I need?
Into: Mortgages Guarantee on mortgages What type of cover do I need?
Comparing the risks covered: 10 questions to ask! 1. What is the age limit to apply for the different policies? If you have exceeded it, are there any alternatives for oler people? 2. Is there an age limit for the cover to make benefit payments? 3. What is the deferred period for the various covers? 4. What are the qualification periods - initial and requalification? 5. What is the amount of the benefit payments in case of invalidity? 6. Are the exclusion causes too restrictive for (...) Read more
How do I repay my home loan?
Into: Mortgages Mortgage repayments Which repayment method?
The way you choose to repay the amount you borrowed depends mainly on your financial situation and whether or not you are prepared to take risks. In Malta, when a person takes out a basic home loan, the monthly payment pay the interest and also repay part of the amount you borrowed (the ’’capital’’). Provided you are punctual with your repayments, the whole loan is paid off by the end of the term. Moving home, bridging loans and re-financing your loan If you need to raise funds until you (...) Read more
I want to make early payments - what are the consequences?
Into: Mortgages Mortgage repayments I want to make early payments - what are the consequences?
What happens when I make early payments? Your contract with the bank, or to be more precise, the type of home loan you have chosen, will define what happens when you make early payments. Indeed, some home loans, mainly those with a variable standard rate of interest, are designed in such a way that there are no penalties or early repayment charges. However some agreements may include a clause imposing a penalty if the borrower sells the property during the first three years to repay the (...) Read more
Bank accounts: indispensable to your every day life
Into: Running a bank account Current Account deposit Why do you need a current account?
As soon as you receive a regular income, you are almost required to have a bank account... not least, because it will make your life a lot easier! Besides making it easier for you to make monthly transfers to your savings account, you will also find that it is more convenient to pay your bills and make other payments. Obviously, there is nothing which forces you to open a bank account......you can make all your payments using cash and keep your money under a mattress.. but there are a (...) Read more
Types of accounts
Into: Running a bank account Opening and closing a current account How to open a bank account?
Types of accounts When selecting an account, think about what’s most important to you. If you’re always in credit, it may be about getting the best rate of credit interest. If you are often overdrawn it may be about getting the cheapest rate of debit interest. Joint Account: A current account, usually for a husband and wife, or long-term partners. Both partners are jointly responsible for each other’s debts. Fixed Deposits: These are usually interest bearing accounts. A fixed rate of interest (...) Read more
Some reasons for closing an account
Into: Running a bank account Opening and closing a current account How to close a bank account?
Joint accounts can be very useful where the finances of two or more people are closely linked.But what happens when things go wrong? If possible, you should immediately inform the bank for the joint account to be closed and new accounts to be opened in sole names. The bank will also need to know how you wish to handle any existing financial commitments. However, this is not always possible... What happens if partners split up, but one of the account holders carries on writing cheques (...) Read more
Paying money into the overseas account
Into: Running a bank account Opening and closing a current account How to open an account in the EU?
How to pay money into an overseas bank account Transferring money from one bank to another There are several ways to transfer money to another bank: 1.-> You can ask your bank to issue a bank draft in any currency. 2.-> You can send money electronically through the banking system, by sending a transfer from one bank to another. This is faster than transacting by bank draft. Not all banks operate in the same way and charges may vary depending on the bank or exchange bureau one uses. (...) Read more
Keeping your bank statement
Into: Running a bank account Running a current account My bank sends me a bank statement; what should I know about it?
There is no legal requirement on you to keep any statements. Remember, some banks charge a fee for reproducing statements, and if your bank has an online service, you might want to print off and keep a hard copy of your statements or at least check how long statements are available on-line and whether hard copy statements are available. Banks keep cheques for a period of 12 months and cheque images for an indefinite period. If you disagree with what is on your statement You may find (...) Read more
Be aware of your credit balance
Into: Running a bank account Running a current account Cheque clearing cycle: how does this affect my account?
When you pay a cheque into your account, the funds are immediately credited to your account but these are blocked for a number of days pending clearance by the Bank on whom the funds are drawn. If your bank does allow you to draw against this uncleared money, it will be treated in the same way as if your account had been overdrawn and you would, therefore, be charged interest and perhaps a monthly fee for running your account. Also, if your bank has to “bounce” one of your cheques or direct (...) Read more
Different costs for different overdrafts
Into: Running a bank account Running a current account Overdraft facility- is it for you?
Different types of overdraft - different costs: unauthorised overdrafts If your account goes overdrawn without the bank’s permission or you exceed the limits set in an authorised overdraft, then this is an unauthorised overdraft. As a general rule, when you do not have an authorised overdraft in place, then any cheques or withdrawals for a sum higher than the amount available in your account can be “bounced” - that is, the bank may not honour them and will probably make a charge for (...) Read more
The single currency area - the Euro Zone
Into: Means of payment Cash payments Cash payments in your country; what does the law say?
The single currency area - the Euro zone According to a study by the Euro Barometer published in June 2004, analysing public opinion in Europe in relation to financial services, 40% of people prefer to make payments in cash. Since the 1st of January 2002, the Euro has replaced national currencies and has been adopted in 17 of the EU countries: ■Belgium ■Germany ■Estonia ■Ireland ■Greece ■Spain ■France ■Italy ■Cyprus ■Luxembourg ■Malta ■The Netherlands ■Austria ■Portugal ■Slovenia ■Slovakia (...) Read more
How to write a cheque
Into: Means of payment Cheques Basic facts
Here is some practical advice on how to write a cheque: Write your cheque using a black pen so that it is permanent immediately. Don’t forget to write the name of the payee and the amount to be paid in words and figures. Don’t leave a gap after the word “Pay” to avoid forgery. Always use the same signature so that the bank can spot any potential forgery. Make sure you fill in the cheque’s stub with the relevant information; date, amount paid, payee’s name. You may need to compare your (...) Read more
Where and when to pay by cheque ?
Into: Means of payment Cheques Where and when to pay by cheque?
Paying by cheques According to the Eurobarometer “Europeans and Financial Services” published in June 2004, cheques are the least used means of payment in Europe.However, there are significant disparities between countries. Whatever the case, paying by cheque follows a number of rules which we invite you to discover in the next section. Payment using cheques Cheques are normally account payee A/c which means they can only be paid in the account of the person named as the payee. If a (...) Read more
Cheques lost or stolen; how to stop them ?
Into: Means of payment Cheques Cheques lost or stolen; how to stop them?
How can I stop a cheque? You need to be as quick as possible to avoid liability for any payment you want to oppose; once you have stopped a cheque, your account will not be debited to honour the cheque’s promise. To stop a cheque you must: —> tell your branch where your account is held, by phone or e-mail; — > ensure your branch has clear details which correctly identify the cheque you wish to stop: cheque number, date, amount and the name of the payee. There is a fee to stop a cheque, (...) Read more
Cash withdrawals
Into: Means of payment Debit and credit cards Withdrawing money
Making cash withdrawal from a cash machine Here are the 5 key steps of making a cash withdrawal from a machine: Check that the machine is in working order, then insert your card as indicated by the arrow. Enter your personal identification number, away from onlookers. Select the service you require, in this case withdrawals and select the amount that you require. Ask for a receipt which you may need to check your bank statement. Be careful: don’t leave it behind, it shows some of your (...) Read more
Card fraud
Into: Means of payment Debit and credit cards Fraud
Liability for fraudulent or unauthorised use of credit/debit card You will not have to pay for any misuse of the card: >>after you have reported its loss or theft. >>if the card is lost or stolen before you receive it. >>if your card is used fraudulently but you still have the card in your possession. You can only be liable for losses if the bank can prove that you were either fraudulent or did not take reasonable care in handling the card. Here are a few examples of what could (...) Read more
How can I monitor the stock market?
Into: Savings & Investments Stock market investments What is the Malta Stock Exchange?
How do you monitor the stock market? To buy or sell shares at the right time, you need to know what is happening on the markets. You need to look for: >>transaction volume of handled shares: handled shares include both shares that are bought and sold during a given period of time for a given share market. If you notice sudden fluctuations, try to find out why. >>the market capitalisation: it represents the market value of a listed company which is calculated by multiplying its current (...) Read more
Different Markets, Different Stocks, Different Types of Orders
Into: Savings & Investments Stock market investments How to make investments on the stock market: stocks and shares
Once you have got in touch with your intermediary, you need to deicde what type of order you want to place. There is a variety of ways you can buy or sell shares, not just at the best price your intermediary can get. These orders are the most common: Limit orders - Placing a limit order: You place a limit order in order to buy or sell a stock at a price you specify - the limit - or better. A limit order to buy would be executed at the limit or lower, while a limit order to sell would be (...) Read more
What do I have to look for when chosing bonds
Into: Savings & Investments Stock market investments How to make investments on the stock market: bonds
What aspects do I have to look for if I choose to invest in bonds? There are a number of key variables to look for when investing in bonds: (a) the bond’s maturity; (b) redemption features; (c) credit quality; (d) interest rate; (e) price; (f) yield to maturity, and (g) tax status Together these factors help determine the value of your bond investment and the degree to which it matches your investment objectives. The Bond’s Maturity A bond’s maturity refers to the specific future date on (...) Read more
How safe is the issuing company?
Into: Savings & Investments Stock market investments How to make investments on the stock market: bonds
But how can I know whether the company or government entity whose bond I’m buying will be able to make its regularly scheduled interest payments in five, 10, 20 or 30 years from the day I invest? You may have heard your intermediary mention the term “triple A” or simply an “A”. These are called “ratings”. Each international bond is usually given a rating by a rating agency. These agencies - such as Moody’s or Standard and Poor’s - give these ratings when bonds are issued and monitor developments (...) Read more
UCITS
Into: Savings & Investments Stock market investments How to make investments on the stock market: UCITS products
NOTE: DIRECTIVE 2009/65/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 13 JULY 2009 ON THE COORDINATION OF LAWS, REGULATION AND ADMINISTRATIVE PROVISIONS RELATING TO UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES (UCITS) WILL BE TRANSPOSED AND IMPLEMENTED UNDER MALTESE LAW IN JULY 2011. CONSUMERS ARE TO BE ON THE LOOK OUT FOR ANY CHANGES CONCERNING THEIR RIGHTS PARTICULARLY WITH REGARDS TO THE PROSPECTUS AND THE KEY INVESTOR INFORMATION DOCUMENT WHICH WILL REPLACE (...) Read more
What are the charges and the returns?
Into: Savings & Investments Stock market investments How to make investments on the stock market: UCITS products
Returns UCITS funds can invest in a number of securities, and as such will have the same returns as non-UCITS products. Broadly speaking, you can choose between two types of funds: 1) UCITS income funds will issue returns on the capital invested by means of dividends or coupons. These funds are liable for income tax on returns from investments, and capital gain tax when sold; 2) UCITS growth funds which invest in capital growing companies thereby allowing the fund to reap the benefits (...) Read more
Surrendering a policy
Into: Savings & Investments Life insurance policies What is life insurance?
Surrendering a policy If there is no alternative but to surrender your life policy, you should first discuss the problem with your insurer or insurance intermediary who may give you advice on how you may avoid surrender. Always get a written quotation of the surrender value from the insurance company before you make a final decision. Think twice if someone suggests you surrender a policy with one insurance company and take one out with another company. This is called ’’churning’’ and (...) Read more
With profits endowments
Into: Savings & Investments Life insurance policies Taxes on life insurance policy?
With-profit endowments - Annual and final bonuses The annual (“reversionary”) bonus This is the bonus declared by the insurance company and it reflects investment returns from year to year and which will be added to the policy and paid to the insured on maturity or early surrender of the policy or on the death of the life assured. The insurer will add a declared percentage to the sum assured payable under your policy. This addition is in proportion to the invested premium and accumulated (...) Read more
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