Depending on your planning, getting credit on the square can both help and hinder finances even more. Know when a loan is the solution.
The saying goes that “poached cat is afraid of cold water”. So if you fumbled with your accounts and got into debt, it’s understandable to be afraid to make new financial commitments. This even when everyone says a loan is the solution to their problems. Will you not be able to pay the installments and end up getting even more debt?
Undoubtedly, committing to a loan without being sure that you will be able to pay the installments is a trap. On the other hand, depending on the interest rates you currently pay, getting an advantageous line of credit can help you organize your finances. The following explains what needs to be considered and what to do to plan.
High interest rates are a good reason to get a new loan
One of the reasons why many are afraid to borrow is that in doing so, one has to pay interest on the money released. The big issue is that when we fail to pay a bill, companies also charge fines and interest for the delay. Therefore, if you are already paying interest, it is worth comparing the Total Effective Cost of your debt with that of the loan.
Responsible for the debt of many Brazilians, revolving credit card interest rates are among the most expensive in the market, around 14% per month. Well, let’s imagine that to settle the debt on the card, you get a loan with interest rate of 6.5% per month, this represents a good savings. Not to mention that by using a loan to repay your debts, you can still get your name clear.
And since we talk about Total Effective Cost, it’s important to note that it covers far more than just interest rates. In fact, this rate refers to all charges and expenses included in credit operations. According to GoodThink Bank rules, all financial institutions are required to report to the CET in detail. Be aware of this when comparing the costs of your debts with those of a new loan!
Loan to clean the name is not always worth it
Those who are negative often hear that a loan is the solution to getting their lives up to date. If you find yourself in this situation too but are afraid to follow the advice, know that you are not wrong! Unless the CET of your current debt is higher than that of a loan, it is generally not worth committing to another debt just to clear its name. Even because, even with the payment of debts, its history remains available to companies. That is, it may take a while for your credit score to improve, facilitating access to opportunities and services.
In these cases, more important than pursuing a loan, is to try to identify the causes of debt. That way you can correct budget failures and perhaps even renegotiate your debts with discounts.
Questions To Ask And Find Out If A Loan Is The Solution
Even paying high interest on overdraft or revolving credit card interest is a serious loan! Because, your hiring should never be done impulsively and without planning. Otherwise, it can further damage your finances.
To help you decide if a loan is the right solution, here are 6 questions to ask yourself. Check-out!
Do I know the real size of my financial situation?
It does not matter if the purpose of the loan is to pay off debt or buy a new car. Well, the only way to know what the value of the installments fits in your pocket is to put all your income and expenses on paper, and from the math.
I know exactly what I want to do with the loan money?
When you get a bank or financial loan, you pay interest on the money you release. So calculate the amount you need to pay off debt or make your dreams come true and ask for just the amount you need. You do not want to pay dearly for money and leave it still, right?
What is the loan repayment time? I have stability?
In general, for short-term loans, planning is simpler. For even in the event of termination of employment, benefits such as unemployment insurance are often possible. For long term loans, you need to think further. When it comes to loans that you can expect – such as home remodeling, for example – it is worth investing first in an emergency reserve.
What are the consequences of not paying my debts?
Even with fines and low interest rates, certain types of debt have more serious consequences than others. For example, delays in paying bills such as rent, condominium, water, and electricity may result in disruption of services or actions for delivery of the property. But in these situations, a loan can be the solution as long as it fits your budget.
Is the CET loan lower than current accounts?
As said before, some forms of credit, such as overdraft and revolving card, work at fairly high interest rates. In this scenario, getting a loan with lower rates is much more advantageous.
Have I thoroughly researched what my options are? Is loan the solution?
Whether paying off debt or getting a paper plan, getting a traditional personal loan is not the only way out. In fact, if you have a repaid vehicle or property in your name, getting a refinance guarantees very attractive rates. Depending on your profile at FinanceWise you can find rates starting at 0.99% per month. Not to mention that the amounts released are higher and you get more time to pay!
You can see that depending on your debts, the loan is the solution as long as it has advantageous conditions, right? Enjoy that you are on our site and make a simulation to receive up to 10 pre-approved credit offers! Then just compare and choose the one that fits in your pocket.