Change your car, undertake some reform at home, solve an emergency or repair... there are many reasons why people decide to ask for loans . However, before going to the bank, it is important to take into account the financial health of each person: do the numbers and check if the requirements are met to request it with guarantees.
There are always unavoidable expenses that can involve a significant outlay.
Buying with a credit card without prior planning or going to quick mini loans with very high interest are not the most advisable options to face them. Avoiding over-indebtedness is especially important at a time when many households may be experiencing financial difficulties. It is what is called financial health and it is time to watch it.
I can afford?
It should be borne in mind that the loan is a contract through which the financial institution gives the person an amount of money in exchange for returning it within a specified period, complying with the agreed conditions and paying the corresponding interest. Therefore, before requesting an amount of money in this way, the amount needed must be carefully adjusted, without asking for more and adding the interest and commissions that the operation may entail.
Another fundamental factor is to determine if it will be possible to return the money in the agreed time. It is important to be realistic when meeting the deadlines, since a delay in the payment of installments could lead to some type of penalty, which would increase the debt.
Is it a justified expense?
Once it has been verified that the loan can actually be repaid, it is necessary to consider to what extent it is worth borrowing for what you want to achieve. If it is something that can be done without or a whim, it would be preferable to establish it as a savings goal and, in a planned way, periodically set aside an amount of money to achieve it.
When there is no other option, either due to the urgency of spending or because the reduction in income does not allow you to save what is necessary, you can go into debt and always do it in a responsible way.
What requirements must be fulfilled?
Before granting a loan, financial institutions usually demand a series of requirements and guarantees to verify the solvency of the client and verify the borrowing capacity. Among them, being of legal age, the existence of other previous loans and having solvency and stable income. To verify this last requirement, it is common for entities to request documents such as employment history or the last income statement, among others. The review and approval process may take a few days .
This exercise to assess our financial health should also be done by oneself before going to apply for a loan and asking ourselves how much we have, how much we earn and how much we can spend. In short, knowing how to assess our debt capacity or, in other words, the amount of debt that we can assume without falling into the risk of default. It is recommended that the level of debt be between 35% and 40% of the monthly net income.
What if I go to "quick money"?
The rush is not good counselors. There are people who prefer to skip the deadlines and prerequisites and go to entities that offer immediate loans and that do not request payment guarantees.
It is important to be very careful with these loans since they usually carry very high commissions and interest . When reviewing the conditions of the operation, it is necessary to look especially at its Equivalent or Effective Annual Rate (TAE ) , which is the interest rate that will actually be charged at annual maturity and which includes the nominal interest rate of the operation, the frequency of the payments, bank commissions and expenses.
Despite its drawbacks, these types of operations are usually common in times of crisis due to the urgent need of users to obtain money. The Spanish Organization of Consumers and Users (OCU) warns in a study of the danger of these products "which are the most direct path to over-indebtedness for families in situations of economic vulnerability." For this reason, he recommends not being seduced by products that offer money without demanding guarantees and never exceeding the borrowing capacity.
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