Monday, December 17, 2007

The Downside of Low Interest Rates on Banking and Insurance

Almost everybody's talking about the good side of low interest rates in the Philippines as the time to buy a new house, avail of an auto loan or just borrow money. I don't need to be told of buying my own house since I've been paying for one more than a year already, at the lowest interest rate of zero for three years, that's been draining my bank account every month.

A casualty of the falling interest rate is my BPI Platinum account that used to enjoy 7% per annum but now earning very low interest due to small remaining balance and low interest rate. Been thinking of closing it after almost eight years but the weak sentimental side of me is holding on to it.

The biggest setback in the interest rate game is the effect on my Insular Life insurance I thought will self-liquidate after nine annual payments but, again, due to low interest rates, my insurance agent informed me i still have to pay the tenth installment, one or more than the original target of nine years.

Lesson learned: low interest rates, like the strong peso, is a two-edged sword. It's a blessing to some, and a curse to others!

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