In order to have complete personal financial control, we must always be alert to overconsumption and income commitment to financing. But sometimes debts get out of hand or an emergency expense comes up and by the time you realize you’re already a little tangled up and thinking about getting a loan.

When this happens, one of the first things we think about is: I will get a loan to get rid of these debts.

But is this the best solution?

money loan

The answer is: it depends! In many situations it may be a viable alternative, after all, you may be able to reorganize your financial situation and concentrate your debts. But you have to study the possibilities very carefully.

To help you better understand this, we have prepared this post that will show you when getting a loan is the best alternative to pay off a debt. Check it out!

Understanding Debt is the First Step

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First of all, you need to understand the debt situation you want to repay with the loan. This means calculating the total amount, including interest rates and other possible charges.

For example, you have a $ 1,000 credit card debt (the famous revolving). Based on certain market rates and charges, 10% of revolving interest ($ 40) + 2% (per month) of late payment ($ 20) + 1% (per month) will be added to the total amount. default interest ($ 10). So your debt currently, after the delay, is $ 1,000 + $ 130 = $ 1,130. And it increases every month that you do not pay the total invoice.

Doing these calculations is the first step in understanding the real value of what you owe.

Research Loan Forms

The second step is to research if you can get a loan and what are the best conditions available for your profile. Important: Always search for low-interest lines, such as Just offers.

To do this, you must go to various financial institutions like banks and lenders to understand which loan arrangements you fit. Typically, the most common are personal credit (sometimes even negative people get it) and payroll (done through the company and discounted on payroll).

Personal credit is simpler to get, but usually has higher interest rates. So run real simulations to understand how much you will have to pay. For example, if you take $ 1,000 in personal credit at an interest rate of 4.5% per month, the final amount will be $ 1,315.99.

The payroll has much lower rates, but makes the discount on payroll. Then your salary gets lower every month. The important thing is to go to various institutions and research the best conditions, forms of installation and contract (those that will have lower charges).

Compare debt and loan amounts

loan

With this information in hand you will be able to compare debt and loan amounts and see if it is worth it.

For example, if your debt card has rates of about 15% per month and payroll-deductible credit is 2.5%, it is worth making the loan because you will pay less than your credit card charges and in installments. compatible with your monthly budget.

When possible, start emergency savings. It will be a third option to pay off debt, where depending on the type of investment, the analysis will consider whether the credit interest will be higher than the interest rate on your investment to be worth the redemption.

It is important to remember that overdraft and credit card interest rates are the highest in the market

So if these are the bad guys in your history, it may be worth taking a loan to get this debt over with.

How do you control your monthly expenses? Do you know if you spend more than 60% of your salary on your living expenses? Comment on your opinion about the importance of this control.

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