The intent of this article is to talk about the most common mistakes when applying for a loan and after getting the credit. You will find that they are easy to avoid, but it is often difficult to escape certain bad habits.
The loan needs to be watershed
Applying for a loan can not be a rule, after all they are expensive, especially in a country of high interest as Brazil. So it needs to be seen as an oxygen balloon in your budget, not as the fuel that makes the machine spin. Before applying for the loan you need to study very well how you ended up in this situation. If debts piled up, what led to it? If it’s time to buy a car, is this the time, and can you afford the installments?
If you are cluttered with your bills, applying for a loan needs to make you organize the mess. If you are already organized, go a step further and make projections, spur goals like saving a little and even start investing.
Beware of money
It’s hard to avoid the euphoria of an amount entering your account without you having worked for it. But every penny of it will have to be paid by you and there are still extra interest and fees. So be wary of the money; Don’t go out of your way to do it. If it’s left, great. Keep and pay the installments with this leftover or even pay several installments at once, which always guarantees discounts. No gifts and pampering with money that needs to be paid back.
Take the loan with the first one that comes
One of the great advances that the internet has brought has been the ability to access a lot of information and content. It is therefore difficult to use ignorance as an excuse to choose a loan that is not the most favorable. Compare loans. Interest rates and Total Effective Cost (CET) always need to be explained and the best credit companies have websites and provide all process information.
Only after weighing very well the conditions presented – interest, CET, installments, values - should you opt. The compromise is too high for you to just do with anyone and dig into a hole without having full knowledge of what was around you.
Trust any company
Here is a continuation of the last item. Unfortunately there are many malicious people and institutions that only seek to take people money and scam. One of the most common ones that existed involved in a request for money for pre-approval loan, if it were a guarantee or proof of payment. Of course it was a scam that hurt thousands of people. So before signing the contract, either physically or online, research the institution. Read the ratings and reviews. Look for criticism and see if it proceeds and is relevant. And ask any questions that are required for customer service at the institutions you are interested in.
Good companies know how to open these channels and are open to answering questions. Poor quality companies hide. Keep that in mind.
Opt for more installments without thinking too much
When making a simulation it is possible to choose the number of installments in several of the financial ones that exist. And the higher the number of parcels, the lower their value, which always seems attractive. Well, don’t fall for this mistake as you will be paying more interest and increasing the Total Effective Cost of the loan. If your budget allows, pay larger installments, but in a shorter amount of time, because you will pay less for the amount you are asking for and you can move on in your financial life faster.
You can still pay several installments at once, which is allowed. Again: If this fits your budget, make this choice. Discounts are common in this case.
The interest rate everyone knows what it is, or at least they should know when applying for a loan. But CET often goes unnoticed, which makes no sense because this is precisely the most important. Total Effective Cost is more important because it also charges extra fees, IOF (Financial Transaction Tax) and other costs so you know what you are paying.
All credit companies are required to make CET information available, even if it is in small, hidden letters. So look for this because it is important and put it into your planning.
Don’t search for Fintechs
This is a big mistake. Fintechs – financial market startups – have impacted the world, including Brazil, on their bureaucratic processes, the importance of technology and often more affordable prices. Borrowing from your bank may have its good points, but fintechs are there to win customers and offer good quality services. Don’t even give up knowing what they have to say.