Category Archives: Human Development

Debt Trap – How loans trap us

The financial crisis is one inseparable part of a person’s life, and it may come in anyone’s life, without any notice. There are situations when the most financially stable person would seek support. Any they come at any time of our lives without notice.

That need for financial support is complemented by a loan, which could be a formal arrangement with the banks, financial institutions or informal money markets with individuals. The loans are either business loans, housing loans and the widely use loans are the personal loans.

When the credit is availed by the banks, other financial agencies and informal money markets for the personal use, it is called Personal Loans. This Personal Loan has come to the rescue of the many people, with the instant availability of funds. These Personal Loans have always been the helping hands during the urgent needs of the people and have solved various unavoidable circumstances in a person’s life.

But at the same time, the Personal Loan has been a cause of worry for many. Even, if the Personal Loans have been the lifesavers many times, they are the ones, which come with some hidden traps too


Informal Debt-Trap

In Papua New Guinea, the desire for fast personal loans to patch the gap before the next payday has forced many people to turn to INFORMAL MONEY MARKETS. The main reason for this is the CONVENIENCE, quick turnaround and the ZERO paperwork that comes with the requests for a loan.

As always, convenience comes with a price, and the price for this informal money market is very high. The interest charge for these loans are usually between 30-60 percent and only for a short period usually within 1-2 weeks.

The formula used for this interest calculation is the SIMPLE FORMULA.
You borrow K1, 000.00 at rate of 40% for 2 weeks; you pay K1, 400.00 at the end of the 2 weeks. If you do not pay at the end of the 2nd week, they charge another 40% on that K1, 400.00 and you end up paying K1, 960.00 after a month.

These informal money markets has sadly been a DEBT-TRAPPED for many Papua New Guineans who were not able to pay their loan when the loan sharks come calling.


Formal Debt-Trap

Then there is the Banks and the Financial Institutions who also offer personal loans aside from housing loans and business loans.

The requirements for personal loans, housing loans and business loans varies from each Bank and financial institutions. However, the calculation of the interest charge is the same across all those different requirements.

I will discuss the Housing Loan and how interest are charge, it is no different to a personal loan and business loan.

Personal loans have higher interest rates, Kina Bank charges about 20% p.a and BSP charges at about 27% per annum.  Home Loans have lower interest rates. Kina Bank Charges 6.5% interest on home loans whilst BSP Bank charges 6%, however BSP has a special of 4% per annum for the First Home Ownership Scheme over a period of 40 years.

Let’s use the FHOS of BSP to do a calculation of K400,000 for period of 40 years at 4% per annum interest

These Banks and financial institutions use COMPOUNDING FORMULA to calculate interest payable and additional charge interest on any outstanding loans which the called CAPITALISATION.  There 2 calculations, the first is for the repayment amount for the duration of the loan and the other is the interest charge on any outstanding loans. The interest is calculated daily and charge monthly.

Formula:

Mortgage Calculation Formula

Calculation:

  • 4% annual interest rate needs to be change into an effective monthly rate. Therefore we divide 4%/12 months = 0.3% effective interest rate
  • Number of repayments would be 40 years multiple by 12 months, therefore 40 x 12 = 480
  • Calculating the Monthly repayment using the formula above gives you K1, 573.64 which is monthly repayment
  • Aside of the fixed repayment, there is also an interest charged for loan outstanding. This interest is calculated daily and charged monthly, this charge is called CAPITALISATION.

A simple spreadsheet of repayment looks like this after calculations are done, it is done using a compounding formula

The BIGGEST TRAP in this Formal Loan is that the loan interest is charged daily and added to the loan amount monthly. This interest on loan increases the loan amount each month, and whilst we pay fixed amount monthly, the repayment would not seem to make any difference as CAPITALISATION costs keeps adding up.

The only way to get out of this formal debt-trap is that you find ways to pay more than then monthly repayment, any lump sum amount or extra repayments would assist in getting out of this, otherwise, it would take more than 40 years to completely pay of your debt.

Free Email Address is bad for Business

I have seen so many professional business cards with a gmail address on it and my first instinct is never to take that person seriously!

Maybe it is just my way of filtering the noise but how many companies and business executives do the same thing as me when they look at a business card with a Gmail, Hotmail  or yahoo address?


Most people will say, this is a way of keeping costs down and to use as much free stuff when you starting out in business.

Personally, using the FREE EMAIL risks the following;

  • You missing out on Marketing Opportunities

A perfect way for your Brand to stick at the minds of people is when you use your own business name in an email address. The business sells itself without making an effort.

Using the FREE EMAIL, makes you lose that marketing opportunity!

  • It looks unprofessional

Flashy looking business cards with a gmail, yahoo or even a Hotmail email address just looks unprofessional. As much as someone appears to look and play the play the part, the FREE Email address makes you look like a fake. It is like a Michael Jackson impersonator – everything looks real until they open their voice to SING.

  • Hackers love FREE email account

Free EMAIL account are so easy to hack! A lot of hacks on email happens on gmail, yahoo and Hotmail. Using your own business email makes it harder to be hacked.

  • Can be mistaken for a SPAM

Have you wondered why most of your proposals sent to companies and business never get a reply? Maybe because it was mistaken has a spam and its’ either blocked or sitting in the spam box. Free EMAILS are associated with SPAM and 9/10 your proposal would be considered the same.

It is not hard to get your own domain name. A lot of ISP’s provide that already.

I used to use a google business before when I registered shellnetpng.com but they started charging monthly for every other email account created. I now use ONE.COM, as I can have as many email address under just one domain account name.

If you need your own domain name – hit me up and I can assist you.

40 ways your Priorities should change after 40

by: Alexander Breindel

  1. You don’t let others’ opinions determine your life path
  2. You stop trying to change what you can’t control
  3. You focus on real friendships
  4. You make self-care a top priority
  5. You stop striving for perfection
  6. You learn the difference between problems that need solving and situations that don’t
  7. You know how to leave toxic relationships
  8. You weigh the consequences of your actions
  9. You value your “faults”
  10. You realize that complaining isn’t getting you anywhere
  11. You prioritize your whole-body wellness
  12. You start to ponder what happens after you’re gone
  13. You take time to decompress
  14. You prioritize happiness over achievement
  15. You make finding a fulfilling career a priority
  16. You seek meaning over material
  17. You get a handle on your work/life balance
  18. You get your stress under control
  19. You prepare for an empty nest
  20. You think about the goals you’ve forgotten
  21. You start preparing for retirement
  22. You think about life insurance
  23. You consider long-term care
  24. You ponder your legacy
  25. You value reflection over spontaneity
  26. You focus on longevity
  27. You become okay with saying “no”
  28. You follow your instincts
  29. Your contextualize your life
  30. You stop caring how old you look
  31. You invest in your long-term health
  32. You think more about yourself
  33. You stop comparing yourself to others
  34. You value kindness
  35. You stop thinking about regrets
  36. You stop judging others
  37. You stop trying to please everyone
  38. You stop being afraid of “missing out”
  39. You work smarter, not harder
  40. You let others help you

Footprints

Dear Family & Friends,

Been trying to figure out what to do on my Birthday as I approach the halfway mark of the life expectancy in Papua New Guinea. I was wondering if I had at least influenced anyone I came across in the last 10-15 years and if there was any significant positive change in those who I had met.

I guess what I am trying to say is, am at the stage where I am thinking, will anyone remember me after I am gone? Maybe my children will …but would my grandchildren and great-grandchildren remember me?

Am thinking – what I need to leave behind is a legacy……….

So I have decided to create a website (blog) which I would document some of my passions (not the nasty ones). I have named it ‘Paura – the Digital Nomad’, that summarizes my two main passion of Technology and Travel. The last few years, I did much travel and involved in technology but did not get to pen them down for someone else to enjoy.

So I’ve created the nomadicpaura website will be collection of my interests in life going forward. Aside from Technology and Travel, there would be a page on Entrepreneurship, a page on Food (who dosnt like to eat or even cook? ) and of course, there would be another page on Photography.

I plan that this website would be use as a guide for anyone who hasn’t really grown any wings to fly away from their nests and also some pointers on travel locations, budget meals, tips on photography and some advice on technology and business.

Hope some of you follow me on this journey…