Credit product is a kind of financial product based on trust. Its operating principle is that banks convert their credit assets into wealth management products through trust companies and sell them to customers. By issuing such products, commercial banks will use the funds raised through trust to replace the existing loans of commercial banks or issue new loans to enterprises.
Importance of credit products:
Under normal circumstances, such products launched by banks generally choose excellent credit assets, and yield to maturity can reach the expected income level, which is popular because of its characteristics of timely payment, high income and high security. However, credit wealth management products are closely related to the bank's loan interest rate. In the initial trust contract, there was an agreement on interest rate protection, that is, the interest rate of the borrowing enterprise was lowered with the reduction of the central bank's interest rate. If the loan interest rate is greatly reduced, the actual income will be lower than the expected income. In another case, the borrower of credit assets terminates the original loan in advance because of the interest rate cut, and the bank will recover the loan in advance for income liquidation and terminate the related credit wealth management products.
The essence of credit products
In essence, credit asset wealth management products are similar to corporate bonds. Enterprises borrow money from investors through banks and pay the principal and income to investors after maturity. At present, the annualized rate of return of such products is generally between 4% and 7%.
Current situation of credit products
According to incomplete statistics, there are thousands of wealth management products issued by bank credit assets. Although the current credit asset wealth management products basically do not promise to protect the capital, bank wealth management experts explained that because the borrowers of such products are mostly energy enterprises or state-owned monopoly enterprises, as well as government agencies, the credit rating of credit subjects is high, which greatly reduces the risk of products.
Historically, this kind of products can generally achieve the expected rate of return, with low risk. Compared with fixed income products, the income situation is better, and it also has obvious advantages over bank deposit interest rates. When investors choose this kind of products, the most important thing is the choice of investment enterprises. The quotation of such products mainly depends on the cost of bank lending. For enterprises with high credit rating, the interest rate of bank loans is relatively low, and vice versa. Investors should not blindly pursue product quotations. Ultra-high quotation often means that investors' funds will be invested in an enterprise with relatively high loan cost, that is, the credit rating of the enterprise is low, and investors will bear greater risks. In addition, we should also pay attention to the maturity of such wealth management products, because the longer the maturity, the worse the liquidity of investors' assets, which may lead to the loss of other better investment opportunities.