Are you going to apply for a loan? Consider these points first

Applying for a loan is often a matter of “fear” for some people, as it can be very complicated to apply for, banks or institutions may reject the application, or they may be afraid of not spending it on what they actually asked for.

According to a survey conducted by Bravo, a company dedicated to debt restructuring, 60% of people are over-indebtedmainly due to poor financial management.

On some occasions, the ignorance The lack of knowledge about how to use credit is one of the main reasons why Mexicans get into debt, explained Luis Lucido, an expert in financial education and Global Brand Manager of the company Bravo in an interview.

For this reason, it is important to take some considerations before applying for a loan of any kind, whether to cover an emergency or for something planned.

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Consider these aspects

One of the first steps, even before knowing which institution offers better conditions, is a organization regarding the life that will be given to the loan.

According to Lucido, good planning is essential to avoid ending up in debt.

For this destination must be considered To obtain credit, take into account the interest ratehe payment deadline and primarily How much will it impact the cost of credit? in your monthly budget.

“If you spend more than 30% of your income on paying off a debt, you are already over-indebted (…) you will have to cut back on basic expenses such as housing, clothing, housing, and health, in order to pay off that debt,” he explained.

Also, you have to consider any additional charges or associated fees and the reputation of the person who is lending to you.

“Sometimes it sounds very attractive, ask for it today and we won’t check it at the bureau (…) those kinds of solutions that can solve the problem very quickly (…) you end up paying not three times, but six times more because it got out of hand,” he said.

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Other factors for falling into debt

For the financial expert, The main problem that causes people to fall into debt is poor financial educationAn example of this is that credits are often used as extra income.

“Credits should be used for specific projects, not day-to-day spending,” he said.

The Lack of financial education, impulsive spending and the unexpected situations such as the loss of a job or a medical emergency are other factors why Mexicans end up with more debt than they can handle.

To avoid this type of scenario, he said, you need to properly understand how credits work, what interest rate they offer and the minimum payment. “It’s a huge temptation to say this month I can only pay two thousand pesos on the card and that will free me up, yes, but that means that the following month the debt will double or triple.”