When to take out a loan to pay debts?

Overdue accounts and running interest, in these circumstances several options arise to return to have a balanced financial life. If you have been negative for some time, you probably have heard from a friend or family member that taking out a loan to pay off debts is the best strategy. However, borrowing money is still a debt too, isn’t it?

Undoubtedly being in debt is a situation that takes many people’s sleep. In some cases, applying for a loan can help resolve a financial issue, but this is not a suitable solution for any crisis that arises in your household budget.

Thinking about the relevance of this topic, we prepared this post to assist you in deciding whether or not it is worth taking out a loan to pay debts. Continue reading and check it out!

What is the importance of understanding the loan to pay debts?

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Be it unforeseen, or the lack of planning, it is not difficult to find people who are experiencing some financial difficulty. Given this scenario, the first thought that comes to mind is “I’m going to take a loan to catch up with the bills”. In general, this can be a good solution to reduce your expenses, provided it is chosen with care.

There are several types of loans available in the market, however, before making this decision, it is important to identify the reason for your debt and how long it is open.

That is if you owe the revolving credit card and the overdraft, for example, it is indicated to resort to a loan with cheaper interest to pay off debt than to be paying abusive interest.

When is it worth taking out a loan?

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While resorting to loans at times is not the best alternative, in certain situations, it may be worth using them to solve the problem. For this reason, it is important to adjust the outstanding debts to your financial reality, since any misstep can worsen the situation, resulting in more debt.

Here are some tips that will help you choose whether or not to take out a loan to pay off debts.

Overdue debts

As already mentioned, if you owe the overdraft, you are consequently paying some of the highest interest rates on the market. In addition, the more the days pass, your debt will grow at an alarming rate thanks to the high charges that are charged.

If that’s the case, you need to act now. Search for loan types that offer lower interest rates. Thus, an option is the payroll loan – the amount of the installments is discounted directly from the payroll.

However, if you do not want to choose to make a payroll loan, you can choose the personal loan, which, despite charging higher interest rates, still has lower rates when compared to credit card and an overdraft.

Avoid the dirty name

Who has been negative for a long time, probably has restrictions on the registration of individuals? This situation, in addition to being uncomfortable, causes the individual to be prevented from doing several things, such as financing and even obtaining credit in the market.

Thus, applying for a loan is a good alternative to avoid a dirty name. Regardless of the option chosen, in order to have a balanced financial life, it is necessary to use strategies, such as the household budget, to keep the accounts in order.

Real estate financing

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If you have a mortgage and the installments are overdue, the first step is to try to renegotiate the debt since failure to pay can cause the loss of the asset. However, if the institution offers high rates, you can seek better credit options and thus pay cheaper installments.

Do you know how to refinance debt?

Debt refinancing is the best way out for people who have lost control of their accounts and are no longer able to pay certain debts due to interest rates. If you have this problem, don’t worry, this is quite common and most people have already gone through this type of situation.

The good news is that debt refinancing offers a number of benefits to defaulters, preventing them from having their name restricted in credit protection services and paying undue interest.

Want to know more about how debt refinancing works? Then check out the post we created especially on the subject!

What is debt refinancing and how does it work?

 What is debt refinancing and how does it work?

Imagine that you have reached the limit of your credit card, but you cannot pay the full amount of the invoice and only pay the minimum amount. So, each month there is a revolving interest charge on the amount that was not paid, not to mention fines.

Debt refinancing allows you to renegotiate the debt with the credit card company, paying the bill in installments that fit in your pocket, with a lower interest rate than paying the minimum bill every month. This type of service can be done in the case of using overdraft, loans and other accounts.

How does debt refinancing work?

How does debt refinancing work?

Generally, the creditor himself contacts the indebted person offering an agreement, but the defaulter can also contact the company and inform him that he would like to refinance the debt.

But some companies offer the option for the customer to do the simulation and contract the refinancing through online platforms, where he can choose how many installments he wants to pay the agreement and print the payment slip for payment in the system itself.

When the agreement is made and the debtor has a negative name, his name is removed from the credit protection services register shortly after the payment of the first installment.

Is it worth refinancing a debt?

Is it worth refinancing a debt?

Well, it depends on the agreement offered by the creditor. Overdraft and loans have very high interest rates, and in some cases, even when the debt is negotiated, the customer can still pay a much higher amount than is due to the company.

However, if you have a debt and are unable to afford the monthly installments, the best option is to refinance so that the account does not become a “snowball” and you are unable to pay.

So, if the creditor company offers a fair deal, it is worth refinancing a debt. First, because you prevent your name from being added to credit protection services or being removed, if it is already negative, and second, because you pay lower interest rates and have credit in the market again.

What are the advantages of refinancing a debt?

What are the advantages of refinancing a debt?

In addition to the tranquility of knowing that there are no debts growing in your name and not having that hassle of companies calling all the time to collect, refinance a debt and remain in default in the market offers many benefits. See some of them!