Who never thought about getting a loan? It can be to pay a high debt on the credit card, to be able to pay a course or even to realize some personal project that needs an initial capital … a loan can be a good option.
Can it really?
What is personal loan?
First let’s know a bit more about what a personal loan is and how it works.
Personal credit is a quicker and easier way of borrowing since you generally do not need a lot of paperwork to borrow one. Having your name clean and documents proving income at hand is enough for many financial institutions to release a personal loan.
Why can not I borrow?
Generally, personal credit interest rates are variable and can be discussed at the time of application. According to the National Association of Executives of Finance, Administration and Accounting (Anefac), the average personal loan rate is around 8.14%, which makes the modality more attractive than the overdraft (10.96% interest per month) and credit card (14.56% of interest per month).
Caring for Personal Credit
When it comes to investments and personal finances, all care is little. With a loan it could not be any different. One of the points that you should pay attention to is precisely what we were talking about earlier: the interest rate.
Precisely because it does not have so much bureaucracy and in-depth evaluations of who is asking for credit, interest rates may be higher to cover the risks. In addition to the interest, it is also important that you check the Total Cost Effective (CET) – which lists all the costs of the loan – in addition to other charges such as fines and stay commission.
And just like any other type of investment, it is important that you make a plan before taking out a loan, by putting at the tip of the pencil how much you will pay per month, any expenses that will arise during the payment of interest and possible contingencies that may arise midway.
All to not compromise your budget and you end up falling into a known financial snowball: having to get a loan to repay your other loan.
But after all … when taking a loan can it be a good option?
That depends a lot on how much debt you have and what your current financial momentum is. Generally, personal credit is recommended to take out large debts with high interest rates.
A very high value on your credit card account can also be a good reason to apply for a personal loan. On this occasion, you can use some options:
- Pay the invoice minimum every month. Depending on the size of the debt on the invoice, when choosing to pay the minimum it may take more than a year to clear it, in addition to end up paying more than double the initial amount.
- Pay a lump sum per month. This option guarantees a fixed monthly payment for the invoice, but will still suffer interest corrections throughout the payment, which may also increase the cost of your invoice.
- Take out a loan. This can be a good option as you can get a loan for the full amount of your bill. In that case, you’ll be shifting the interest rates on your credit card bill for loan interest, which is usually smaller and easier to pay.
You can also consider getting a loan to kick start a personal project, vocational courses or quick specialization, as well as unforeseen reasons for illness or other emergency needs.
It is not recommended, however, to take out a loan to pay for travel, to buy a car, or to have more money for unplanned expenses, since it should be seen as an outlet for emergencies, or for debts that have a shorter life time of a loan.
For example: the installments of a loan can last for about 24 months. A car, however, can be paid up to 48 times. If you take a personal loan to enter a vehicle, therefore, you will summarily end up paying the car debt plus the loan debt, which may complicate your economic planning. The same thing happens, for example, with the rent of your house: if you take out a loan to pay that month, next month you will have to pay again … along with the loan payment.
So, are you more prepared to ask for a loan? Apply for an online personal loan or a personal loan to be denied by Wilhelm Meister Broker. (I.e.)