No one wants to be in debt or go through a financial emergency where borrowing money is the only solution, but these are common situations and we have to deal with them as best we can. In this article we will help you face your debts so as not to worsen your finances.
Like any other consumer item, money is a financial product. So when we need to get a loan we have to bear the costs of these transactions. The point is that these costs vary greatly depending on where the loan is made, credit analysis and other associated factors.
So how to make a loan securely and securing the best rates? Take a look at our tips and learn how to make a smart loan without further complicating your budget, after all, you’re looking for solutions, not new problems.
Understand how to make a smart loan
1. Loans with relatives and friends
If you have this option, resort to it. That way you can negotiate a much lower interest rate. However, in order not to ruin the relationship, propose a return on borrowed capital (interest) and an instrument to ensure that the deal is legally valid, such as a promissory note.
The disadvantage of this type of transaction is that you may feel more comfortable about late or late payment, which can end up with a years of trust.
On the other hand, the rapprochement between the parties can have the opposite effect, leaving the debtor more committed to repaying the debt to preserve the connection with the friend or relative.
2. Give preference to payroll
Because they have a lower risk, since the installments are directly discounted from the INSS salary or benefit, interest rates are the most attractive in this modality.
The average interest rate on payroll-deductible loans in September was 2.04% per month for those receiving INSS social security benefits, 3% for private sector workers and 1.97% per month for civil servants, according to the Clear7 Bank . Just to get a clearer picture, the average interest rate charged on revolving credit card in September was 12.4% per month.
However, it is not enough just to know that the loan is payable and to accept any condition imposed on it. Fees vary greatly from one financial institution to another, so research and simulations remain essential even in this mode.
This type of credit to a private sector worker can cost between 1.53% and 6.73% per month, according to date collected by the Clear7 Bank in September from the different payroll lending institutions.
3. Search banks
According to a survey by Protest, the CET (which is the sum of all fees charged on a loan or financing or installment payment) of banks is lower than the CET of finance companies. Thus, a personal loan from a finance company will be much more expensive than if you applied for a loan at a bank.
This is because banks have a track record of their customers and can make a more reliable credit analysis. Already the financial offer fast credit and often without credit analysis. Some accept as a client including negatives. Thus, due to the difference in the assumed risk, the rates are different and, in most cases, much higher in the financial ones.
But, how to search quickly and easily? An alternative is to avail yourself of online personal loan hiring services. If you would like to know more about it, read the text right after topic 6.
4. Seek Debt Reduction
Loaning should be a tool to help lower debt since you will be trading one debt for another, but make sure that the new debt will grow at a slower rate by switching from a higher interest rate to a lower one.
If payroll-deductible credit is not a possibility for you, as only INSS employees or beneficiaries can contract this credit, the second best option is the personal loan, which, despite having not very attractive interest rates, can still be cheaper than the installment payment . credit card and overdraft.
Once again, the warning is that the differences between the different financial institutions regarding the interest rate is a reality. So, check the Racken website, research and simulations. After all, your goal is to find the best conditions to get out of debt.
5. Read the contract
It is crucial to be well informed about the terms of the loan, not be fooled and carefully read the credit assignment instrument.
If in doubt, ask and clarify all conflicting points. Also be careful with the sale of financial products, that is, you want to hire something, but the bank or the financial force in the contract to take more than you want and for higher prices.
6. Watch out for online scams
A quick and easy way to research the costs of a loan is online simulations on websites that perform the online loan mode. However, all caution is little, reports of scams are frequent. To protect yourself and not lose the convenience of searching and hiring online, see the tips:
- Only browse secure sites, those that are “HTTPS” and show a lock before the website address.
- Check with the IRS, Racken, Procon and sites like “Claim Here” if the company exists, is able to operate with the financial products it offers, and are satisfied with the services provided.
- Do not pay upfront fees under any circumstances, this is not common market practice and is a strong indication of fraud.
- Be wary if the proposal is “too good to be true,” however much the difference in borrowing costs may vary greatly, if conditions fall far short of the market, be wary. The financial market is governed by strict laws and control bodies, which does not allow for a very wide oscillation between rates and conditions.
- Always require a contract or formal instrument.
- Do not accept to make payments to individual accounts.
- Do not make your data available in comments and public web pages. This will make it easier for scammers to contact you knowing all your information beforehand.
7. Analyze the CET
Many do not know, however, more important than the interest rate is the Total Effective Cost (CET) of the loan, which includes all the amounts charged by the institution for granting the credit, such as taxes, insurance and open enrollment fee.
Therefore, the interest rate is not the only factor that determines the best deal, as there may be other banks or financiers with higher rates but cheaper CET.
And attention, banks and financiers are required to inform the CET, according to Idec (Brazilian Institute of Consumer Protection). So, if looking for information about the CET the institution does not want to inform, call the consumer protection agencies.
8. Proportional Discounts
What if your financial situation improves and you want to pay off your debt before the deadline? By expressing willingness to repay or repay the loan at any time, the customer is entitled to proportional interest discounts that vary from institution to institution. Demand your rights.
This is one of the points you should note and negotiate before signing the contract.
9. Plan your budget
There is no point in taking out a loan and continuing with uncontrolled accounts. Before resorting to one of the lines of credit you need to know exactly how your finances are, things like: How much do you owe? What are your monthly expenses? How much is your net income? What size portion can you afford?
With this information, you will be able to analyze what is the best credit proposal, the best repayment term and it is also possible to see which debts are worth repaying with the loan, because depending on the cost of the debt it may be worth or not. for the other.
Thus, taking out a loan is only a good solution when you have a very high interest rate debt such as revolving credit card or overdraft, for example. In these cases, the debt swap can pay off.
Moreover, it is not right to act on impulse and not care about the amounts and terms of payments, because if you can not pay the benefits, your financial situation can get even worse. Therefore, you need to have a financial plan that is true to your reality, as knowing how much money you have per month to pay for the installments makes finding the best deal easier.
These were the tips that we thought were the most relevant when choosing which loan to take or if it is a good decision to take a loan.