When several small debts start piling up, an easy loan can be the quickest way to get out of a jam, right? However, what would be a solution can snowball into fees, interest and penalties. That’s why, before taking out a loan, it’s important to make sure there’s no catch.
This way, you need to evaluate all the details to identify which is the best option.
How to assess whether an easy loan is safe?
There are some factors that must be analyzed before signing the contract. Many lenders have very high interest rates and conditions that may not be compatible with your reality, for example.
So, it is important to be aware of the pitfalls that can accompany an easy loan. Check out the main points to which you should be aware!
1. Total Effective Cost
Before closing a deal and hiring an easy loan, ask about all the charges embedded in the transaction. Analyze the Total Effective Cost (CET), gives you a real sense of how much will be paid in the end.
Find out about the value of interest, installments and other fees and taxes and compare with the value of other financial, banks and companies.
2. Financial Agents
The retirees of the INSS are the main targets of financial agents, which can lead them to contract very expensive loans. Known as “pastinhas”, these professionals, linked to third party agencies, incite the hiring of credit in approaches in the street.
When this procedure does not result in fraud, it can lead to a debt that is difficult to pay off. This is because, in this case, the credit analysis lacks criteria, such as the real payment capacity of the contracting party.
3. Interest rates
An easy loan often comes with a very high interest rate. This is because, by not performing standard procedures, such as consulting credit protection agencies, the organization that is lending the amount incurs higher risks of “default”.
For this reason, the costs of these contracts are usually more expensive, to compensate for the dangers associated with the transaction. The values, which are already high, can become even higher if there are delays in payments, due to interest and fines provided for in the contract.
4. Contract value
Some lenders offer a higher value than you had planned. However, it is recommended that you only contract what you are sure you will be able to pay.
It is necessary to be guided by your financial planning and not by the credit opportunities offered. If there was a loan amount in your mind, do not accept a larger amount under pressure. This can further destabilize your finances.
5. Payment terms
It is common to be offered easy loan with a very short payment term. In these cases, it is very important that the installments are paid without delays, so that the debt does not increase because of the charges.
Besides, analyze if the installments really fit in your budget. Generally, a longer term is better for those who are in debt. Always try to negotiate a number of installments that is feasible for you. It is recommended that you do not commit more than 30% of your monthly income.
6. Reading the contract
This is the most important tip: never sign a contract without reading it. Take your time, read it so that you do not take risks and accept clauses that you do not fully agree with.
Check if everything that is written matches what was agreed upon, so as not to be surprised with what was not agreed upon. In addition, never close the contract over the phone or on the street and always keep a copy of it for possible consultation.
7. Alternative to banks
Besides the loans made in banks and financial institutions, which have a very high interest rate, there are other ways to get credit. With home equity loans, the monthly rates are less than 1% per month (which is a huge difference when compared to the 6.5% personal loan rate, for example).
Furthermore, it is important to note that you continue to own the property and it becomes your property again at the end of the contract.