Learn how credit works, and make credit your friend
Your plans probably include getting a loan, so it's important to be familiar with the process. Learn the ins and outs of the many credit options available.
A credit is defined as the amount of money that a financial institution lends to the client to be used in the form and terms of the contract, which also establishes the obligation to pay the requested money at the required time, as well as the interest, commissions, and opening expenses.
Credit is an important tool, and if used responsibly, it can be a great ally in meeting your goals and objectives; however, before you take on one, you should consider several factors to make the best use of it and keep your finances in order. Some of these factors to consider are the following:
Desire or need? Think well if what you are going to acquire with the credit is only a desire or a need.
Credit history: Having a good credit history allows institutions to offer better terms, but only if you have not failed in previous credit.
Payment capacity: before acquiring debt, you must be sure that you have the necessary money to pay off payment after payment and within the established term. You can know this by elaborating on a budget.
Rates and costs: before contracting a loan, verify how much it will cost you in the end; compare the interest rates and the Total Annual Cost (CAT). Do not forget that the higher the CAT, the more expensive the loan will be.
There are different types of credit
We recommend that you identify the one that best suits your needs. To help you with this task, here are some of the most common ones:
Credit card
It is a plastic card issued by a financial institution and allows its owner the option of borrowing money from the issuer. If you make good use of it, it can get you out of a lot of trouble, but its mismanagement usually brings a lot of difficulties and economic imbalance.
Personal loan
This is an immediate loan offered by financial institutions, which must be repaid in a determined term plus the interest generated. Normally, to get it, you do not need to have a good history and a stable financial situation. You do not need a guarantor or any associated payroll account.
Payroll credit
It is similar to a personal loan except that with this one you must have an associated payroll account as a guarantee for the institution regarding the periodic payment since when it is associated with the client's payroll, the payment is automatically generated.
Car loan
This type of credit is similar to a personal loan, but the difference is that it can only be used to purchase a car and must be paid off, together with interest, within the agreed term.
Mortgage loan
Also known as a mortgage, it is a loan for the purchase of a real estate property; the payment of the loan is guaranteed by the property you acquire until the end of the contract. Like other loans, it implies the payment of the amount borrowed plus the corresponding interest in the fixed payments.
Credit is a very important tool and if you use it responsibly, it can be a great ally to meeting your goals and objectives.
Do you already know what you will use the credit for?
At present, credit is offered in different sectors, such as banks, popular financial companies, savings and loan cooperative societies, and multiple-purpose financial companies. However, the choice of these is free.
We recommend that you always do it in such a way that your finances are not unbalanced and, above all, that the purpose of the credit is by your needs. If you are going to take credit, for example, a credit card, avoid making mistakes that make it difficult to pay. Here are the most common mistakes made when paying for a credit card:
Paying only the minimum
The minimum payment doesn't help pay off the debt because interest keeps adding up and the debt keeps growing.
Making many purchases in small payments
It is not always good to pay less for longer unless the useful life of the purchased item is longer than the time it will take to pay off the debt.
Paying off debt with a credit card
It is not a good idea to pay off debt with debt; it is better to plan your expenses well before acquiring one, and what better way than with the help of a monthly budget?
Spending more money than you make
If you do this, it is likely that at some point in the life of the loan, you will find it almost impossible to pay it back. Regardless of the loan you take out or wish to take out, you should consider the following:
Read carefully the clauses established in the contract as well as the terms and conditions.
If something is not clear to you, ask, so that you do not have any doubts about the operation of the contract.
Identify the commissions to be paid, as well as the interest rate.
Always have a copy of the contract.
Pay on time to avoid extra charges.
Compare the different options. In the Financial Entities Bureau, you can find interesting data that can help you with this task.
Consult the National Catalog of Financial Products and Services for requirements, rates, and commissions on any credit.
